EUR/USD Price Forecast: Drops Below 1.1400, Nears Two-Month Low Ahead of Trump-Xi Summit

During Thursday's Asian session, EUR/USD extended its weakness, currently trading around 1.13845, after briefly touching a low not seen since July 28, though subsequent follow-through selling was limited. The US dollar index remains firm, exerting sustained pressure on the euro, with market focus shifting to the upcoming China-US leaders' summit.

**Subdued Summit Expectations Weigh on Risk Appetite**

Despite market hopes that the summit could extend the trade truce agreement, overall expectations remain cautious. Yardeni Research explicitly noted not to hold high expectations for the summit, as markets have largely priced in a "no-deal" scenario. The firm believes both sides may make modest progress on extending the trade truce and promoting commercial purchases, but breakthroughs on core issues such as AI dominance are unlikely. This cautious sentiment limits the rebound potential of non-US currencies like the euro.

**Strong Dollar and Policy Divergence Continue to Pressure**

The core driver of euro weakness remains the divergence in monetary policy outlooks between the US and Europe. Recent persistently high US Treasury yields have enhanced the dollar's appeal. Meanwhile, the eurozone's own economic challenges have led markets to hold more conservative expectations regarding the ECB's policy path. In this context, any cooling of risk appetite could further boost the dollar, thereby weighing on EUR/USD.

**Technical Focus on Support Below**

From a technical perspective, EUR/USD's break below the 1.1400 level has intensified short-term downside risks. The pair is currently near two-month lows, and if it fails to quickly reclaim this psychological level, it may test lower support zones further down. Markets will closely monitor summit-related news, as any positive surprise or negative shock beyond expectations could serve as a catalyst for short-term directional movement in the pair.