EUR/USD ticks lower as US Dollar edges up amid fresh trade tensions

• The Euro treads water below 1.1600 amid a somewhat firmer US Dollar.
• US threats of curbing software exports to China have revived fears of a trade war.
• Market volatility remains subdued, with all eyes on the US CPI and the Fed.

EUR/USD drifts lower at the European session opening on Thursday, trading right below 1.1600 at the time of writing, down from the previous day's highs at 1.1620. Fresh trade frictions between the US and China are supporting the safe-haven US Dollar, yet with market volatility subdued as traders brace for the US Consumer Price Index (CPI) data, due on Friday.

In the absence of key macroeconomic data releases, as the US government shutdown continues, trade frictions remain one of the most significant market drivers. In that sense, news that the US is considering curbs on software-related exports to China has revived the trade rift between the world's two major economies.

The impact on markets, however, has been moderate, as investors are still confident that a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping will lead to an extension of the trade truce, avoiding these threats from materializing.

In Thursday's economic calendar, the speech of European Central Bank (ECB) committee member Philip Lane and the release of the Eurozone's Consumer Confidence index will attract attention. In the US, the Chicago and Kansas Federal Reserve (Fed) National Activity Indexes and speeches by Fed governors Michelle Bowman and Michael Barr will provide the fundamental guidance for USD crosses.

Daily digest market movers: Fresh trade frictions support the safe-haven USD

• The US Dollar regains some upside momentum as the White House suggested on Wednesday the possibility of introducing restrictions on a wide range of software products in retaliation for China's decision to curb exports of rare earths.
• US Treasury Secretary Scott Bessent tried to calm markets, affirming that US officials are entering negotiations with the Chinese authorities with "good intentions" and "great respect."
• US President Donald Trump contributed to easing concerns by downplaying the impact of China's restrictions on rare earths' exports and reiterating his confidence in reaching agreements with Chinese leader Xi on topics ranging from soybean trade to nuclear weapons or a ceasefire in Ukraine.
• In Europe, ECB Vice President Luis de Guindos affirmed, also on Wednesday, that the Eurozone's inflationary risks are balanced, underscoring the positive developments of consumer prices and reiterating that the current interest rates are adequate.
• The highlight of the week will be the delayed release of the September US CPI report, finally due on Friday. Consumer inflation is seen accelerating to 3.1% year-on-year, from 2.9% in August, while the core inflation is seen steady at 3.1%. These figures, however, are unlikely to dampen expectations of a Fed interest rate cut in October.

Technical Analysis: EUR/USD is hovering above the 1.1580 support area

EUR/USD maintains its bearish trend intact, with upside attempts finding sellers. The pair was capped at 1.1620 and is now hovering above support at Wednesday's low near 1.1580. The Relative Strength Index (RSI) remains below the 50 area, highlighting negative momentum, and the Moving Average Convergence Divergence (MACD) remains below the signal line.

Below 1.1580, the October 9 and 14 lows in the area of 1.1545 will come into focus. Further down, the channel bottom, now around 1.1455, emerges as the next potential target. To the upside, Wednesday's high, at 1.1620 and the top of the descending channel, around 1.1625, are likely to challenge bulls ahead of the October 21 high, around 1.1650, and the October 17 high, at 1.1728.