EUR/USD drops 0.5% as dollar shrugs off EU-US tariff agreement

EUR/USD tumbled 0.5% to 1.0765 on Monday, with the dollar maintaining strength despite the announcement of a landmark EU-US tariff reduction deal. The agreement, which eliminates tariffs on industrial goods and reduces agricultural levies by 25%, failed to boost euro sentiment as traders focused on diverging economic fundamentals. The dollar index rose 0.4% to 103.35, supported by expectations of sustained Federal Reserve hawkishness following recent inflation data. European manufacturing PMI data remained in contraction territory at 47.8, contrasting with more resilient US economic indicators. Technical analysis shows EUR/USD broke below the key 1.0800 psychological support, opening the path toward 1.0720 (July low). Resistance now sits at 1.0800-1.0820 zone. The pair's inability to rally on positive trade news suggests underlying dollar strength may persist, particularly if upcoming US data continues to support the Fed's restrictive stance.