EUR/USD Price Forecast: How convincing is the rebound?
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UPGRADE- EUR/USD rose to fresh two-week tops past the 1.1200 barrier on Monday.
- The US Dollar lost the grip on the back of Moody’s downgrade of US rating.
- EMU’s final Inflation Rate saw the headline HICP rise 2.2% YoY in April.
The Euro (EUR) picked up renewed upside pace on Monday, in line with the broader risk-associated universe, sending EUR/USD to the vicinity of 1.1300 the figure, or two-week highs. The pair’s advance came on the back of the marked pullback in the US Dollar (USD), which in turn sent the US Dollar Index (DXY) to new troughs near the psychological 100.00 support.
Trade optimism persists despite lack of detail
It is worth noting that EUR/USD managed to stabilise in recent days following a sharp rebound in the Greenback, after China and the United States agreed on May 10 to roll back tariffs from over 100% to 10% and pause further hikes for 90 days. However, a 20% levy on fentanyl-linked imports remains in place, keeping the overall tariff burden near 30%.
The agreement, coming on the heels of a US–UK trade pact and upbeat remarks from President Trump, initially boosted global risk appetite. However, the absence of concrete implementation details fuelled scepticism, capping the Dollar’s rebound and offering only limited support to the single currency.
Fed–ECB policy gap widens
The diverging monetary policy paths between the Federal Reserve (Fed) and the European Central Bank (ECB) remain a key driver of EUR/USD.
While the Fed has kept rates unchanged and signalled a cautious stance on cuts, the ECB lowered its deposit rate by 25 basis points to 2.25% last month and could ease again as early as June. Markets are still pricing in two Fed cuts by year-end, aided by softer April inflation data and tempered trade risks.
Speculative sentiment remains Euro-bullish
Despite the recent slight pullback, speculative positioning continues to favour the European currency. CFTC data for the week ending May 13 showed net long EUR positions increasing to nearly 84.7K contracts, with open interest climbing above 750K, the highest since December 2023. Meanwhile, commercial traders remain net short, signalling ongoing macro caution from corporate participants.
Technical outlook: Key resistance still Intact
EUR/USD remains capped below its 2025 high of 1.1572 (April 21), with further resistance at 1.1600 and the October 2021 top of 1.1692.
On the downside, support lies at the monthly low of 1.1064 (May 12), seconded by the psychological 1.1000 level and the 200-day SMA at 1.0799.
Momentum signals are mixed. The Relative Strength Index (RSI) has bounced past 51, suggesting a modest bullish tilt, while the Average Directional Index (ADX) at 28 points to a still active but weakening trend.
EUR/USD daily chart
Outlook: More volatility ahead
EUR/USD looks set for continued choppy trade, driven by conflicting central bank signals, positioning flows, and evolving trade developments. While speculative sentiment remains constructive for the Euro, lingering doubts over global trade policy and diverging rate paths are likely to keep the pair on an uneven trajectory in the near term.
- EUR/USD rose to fresh two-week tops past the 1.1200 barrier on Monday.
- The US Dollar lost the grip on the back of Moody’s downgrade of US rating.
- EMU’s final Inflation Rate saw the headline HICP rise 2.2% YoY in April.
The Euro (EUR) picked up renewed upside pace on Monday, in line with the broader risk-associated universe, sending EUR/USD to the vicinity of 1.1300 the figure, or two-week highs. The pair’s advance came on the back of the marked pullback in the US Dollar (USD), which in turn sent the US Dollar Index (DXY) to new troughs near the psychological 100.00 support.
Trade optimism persists despite lack of detail
It is worth noting that EUR/USD managed to stabilise in recent days following a sharp rebound in the Greenback, after China and the United States agreed on May 10 to roll back tariffs from over 100% to 10% and pause further hikes for 90 days. However, a 20% levy on fentanyl-linked imports remains in place, keeping the overall tariff burden near 30%.
The agreement, coming on the heels of a US–UK trade pact and upbeat remarks from President Trump, initially boosted global risk appetite. However, the absence of concrete implementation details fuelled scepticism, capping the Dollar’s rebound and offering only limited support to the single currency.
Fed–ECB policy gap widens
The diverging monetary policy paths between the Federal Reserve (Fed) and the European Central Bank (ECB) remain a key driver of EUR/USD.
While the Fed has kept rates unchanged and signalled a cautious stance on cuts, the ECB lowered its deposit rate by 25 basis points to 2.25% last month and could ease again as early as June. Markets are still pricing in two Fed cuts by year-end, aided by softer April inflation data and tempered trade risks.
Speculative sentiment remains Euro-bullish
Despite the recent slight pullback, speculative positioning continues to favour the European currency. CFTC data for the week ending May 13 showed net long EUR positions increasing to nearly 84.7K contracts, with open interest climbing above 750K, the highest since December 2023. Meanwhile, commercial traders remain net short, signalling ongoing macro caution from corporate participants.
Technical outlook: Key resistance still Intact
EUR/USD remains capped below its 2025 high of 1.1572 (April 21), with further resistance at 1.1600 and the October 2021 top of 1.1692.
On the downside, support lies at the monthly low of 1.1064 (May 12), seconded by the psychological 1.1000 level and the 200-day SMA at 1.0799.
Momentum signals are mixed. The Relative Strength Index (RSI) has bounced past 51, suggesting a modest bullish tilt, while the Average Directional Index (ADX) at 28 points to a still active but weakening trend.
EUR/USD daily chart
Outlook: More volatility ahead
EUR/USD looks set for continued choppy trade, driven by conflicting central bank signals, positioning flows, and evolving trade developments. While speculative sentiment remains constructive for the Euro, lingering doubts over global trade policy and diverging rate paths are likely to keep the pair on an uneven trajectory in the near term.
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