Daily Price Outlook
During the European trading session, the EUR/USD currency pair extended its bullish rally, staying strong around the 1.0416 level and even reaching a high of 1.0431. The main reason behind this upward movement is the US Dollar (USD) losing strength for the third consecutive day.
The US Dollar Index (DXY), which measures the value of the Greenback against six major currencies, dropped to around 107.50. This decline came as investors felt that a potential trade war wouldn’t escalate further, which helped reduce some of the risk associated with the USD.
On the other hand, the Euro (EUR) gained some momentum, despite underperforming against other major currencies. This is mainly due to the expectation that the European Central Bank (ECB) will keep its policy-easing approach.
The ECB remains confident that inflation in the Eurozone will fall back to its target of 2% by the end of the year, which has led investors to believe that the ECB might continue its current monetary policies.
EUR Struggles Amid ECB Rate Cut Expectations and US Tariff Concerns
On the EUR front, the shared currency has been struggling against its major peers despite gaining against the US Dollar. Investors expect the European Central Bank (ECB) to continue cutting interest rates, as policymakers are confident that inflation will return to the 2% target this year.
In an interview, ECB Vice President Luis de Guindos stated that inflation is moving toward the ECB’s goal but could see a slight increase in the coming months due to energy prices. However, he remained uncertain about how low interest rates would eventually go.
Last week, the ECB lowered its Deposit Facility rate by 25 basis points to 2.75% and maintained that its monetary policy remains restrictive. Traders now anticipate three more rate cuts in upcoming meetings.
Meanwhile, concerns over the Eurozone economy continue to grow, especially with fears that the European Union (EU) might be the next target for US tariffs if Donald Trump wins the election. Over the weekend, Trump said the EU has taken unfair advantage of the US and hinted at imposing tariffs.
This uncertainty has made investors cautious about the Euro’s future. Despite these challenges, EUR/USD has managed to gain due to the US Dollar’s recent weakness.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.03761, down 0.02%, reflecting a modest bearish bias as it hovers below the pivot point of $1.03879.
This level acts as a critical threshold, where sustained weakness could trigger further downside momentum. Immediate resistance lies at $1.04339, followed by $1.04678 and $1.05190. A break above these levels could signal a reversal of the current bearish trend.
On the downside, the pair finds immediate support at $1.03220. A decisive move below this could open the door for further declines toward $1.02721 and potentially $1.02129, reinforcing the bearish outlook.
The 50-EMA at $1.03512 adds to the downward pressure, acting as dynamic resistance and confirming the prevailing trend.
Technical indicators suggest limited bullish momentum, with sellers maintaining control unless the euro can reclaim levels above $1.03879.
The formation of lower highs and lower lows indicates persistent bearish sentiment, with any short-term rallies likely facing resistance near key levels.
Traders are advised to watch for price action around the pivot point. A sustained break below $1.03866 could provide a favorable entry for short positions, with targets near $1.03220 and stop-loss orders above $1.04239 to manage risk effectively.
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