EUR/USD pops, gold sinks as telegraphed trade deal confirmed

• U.S.–E.U. confirm trade deal with 15% tariff on most goods
• E.U. pledges $600bn in U.S. investment during Trump’s term
• EUR/USD extends gains, gold falls through key support
• Market reaction muted, deal widely expected after Japan pact

EUR/USD, Gold Summary

A trade agreement has been reached between the United States and European Union, confirming what traders had been anticipating following the announcement of a similar agreement between the U.S. and Japan last week. The muted reaction suggests as much, with EUR/USD trading modestly higher on the news. While moves in the FX universe have been contained, gold is a market worth watching, breaking some critical technical levels late last week before going on with the move on Monday.

Surprise!?! U.S.-E.U. Trade Deal Inked

The U.S. and EU finalised a framework trade deal Sunday, confirming widespread expectations for a de-escalation in tensions after last week’s agreement with Japan. Announced by President Donald Trump and European Commission President Ursula von der Leyen in Scotland, the deal imposes a flat 15% tariff on most EU goods—half the threatened rate—and includes a pledge from the EU to invest $600 billion in the U.S. during Trump’s current presidential term. The EU also committed to sharply increasing purchases of U.S. energy and defence equipment.

The key details:

• 15% tariff applied broadly to E.U. goods including autos, semis and pharmaceuticals

• Exemptions include aircraft and parts, critical raw materials, generic drugs, some ag and chemicals

• $600bn in E.U. investment in the U.S. flagged during Trump’s term

• $750bn in future E.U. energy imports, hundreds of billions in arms

• 50% U.S. steel and aluminium tariff remains, with quota system under discussion

• Trump retains discretion to lift tariffs if E.U. doesn’t meet commitments

The reaction has been muted, reflecting that markets moved to price in such an outcome following the U.S.-Japan trade deal agreed last week. The euro and U.S. index futures have nudged higher, while safe havens such as gold have come under renewed pressure.

EUR/USD: Buying Dips Favoured

Source: TradingView

EUR/USD was looking good for the bulls even before the trade agreement, continuing to grind higher within a broader uptrend established in March. After testing the uptrend midway through July, the price bounced hard last Monday, breaking above the minor downtrend it had been sitting in since July 1 before consolidating over the remainder of the week.

Momentum indicators are also mildly bullish, with RSI (14) trending higher above 50 while MACD is on the cusp of crossing the signal line from below in positive territory, favouring upside over downside.

In the near-term, $1.1720 has acted as support and resistance recently, putting it on the radar for those contemplating bullish setups. Above, Thursday’s high of 1.1790 and July 1 peak of $1.1832 screen as possible targets. The session still has a long way to run, but as things stand the three-candle pattern on the daily resembles a morning star reversal pattern—hitting it could encourage additional longs off the sidelines should it close around these levels or higher.

On the downside, a break and close beneath 1.1720 would put the intersection of uptrend and horizontal support around 1.1650 in focus.

Gold Breaks Key Uptrend

Source: TradingView

The key bearish candle on the daily chart last Wednesday proved to be a reliable signal on how gold closed out last week, with the price slicing through uptrend support for the first time since being established in late February, taking out the important 50-day moving average along the way.

With RSI (14) breaking its uptrend and sliding below 50, the momentum picture is quickly shifting to neutral-to-slightly-bearish—a view confirmed by MACD, which has just crossed over the signal line from above while remaining in positive territory for now.

Combined, the price and momentum signals warn of growing downside risk unless the price can reclaim the uptrend in the near-term.

On the downside, dips towards $3320 down to $3310 have been bought over the past fortnight, putting the latter level on the radar for traders considering selling the break. If it were to give way, $3283 was the low struck on July 9 before a more pronounced support level is found at $3250. To contemplate additional downside beyond those levels in a week laden with major risk events comes across as unlikely in the near-term.

If gold were to bounce back above the uptrend and hold there, the 50-day moving average and $3360 are the immediate levels to watch. The latter helped soak up bids for much of July before being overrun on July 21, so it may revert to its previous role in the current risk-on environment. If gold were to stage a dramatic reversal higher, last Wednesday’s high just shy of $3400 will likely be targeted by bulls.