EUR/USD Price Forecast: Minor support turns up around 1.1300
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UPGRADE- EUR/USD embarked on a consolidative range supported by 1.1300.
- The US Dollar gathered extra steam despite discouraging US data releases.
- Flash Inflation Rate in Germany came in above consensus at 2.1% YoY in April.
The Euro (EUR) added to Tuesday’s retracement against the US Dollar (USD), triggering the second consecutive daily drop in EUR/USD, which revisited the 1.1320 zone, or weekly troughs, on Wednesday.
The US Dollar Index (DXY), in the meantime, remained well bid, revisiting the 99.60 zone, where initial resistance seems to have emerged.
Trade optimism meets investor caution
The greenback found some support as markets digested renewed White House rhetoric suggesting a possible easing of trade tensions with China. However, traders remained cautious, with scepticism persisting over the lack of concrete progress behind the scenes. Optimism around tariffs may be fading as market participants demand more than verbal reassurances.
Speaking about trade, investors closely watched the release of advanced prints of GDP figures on both sides of the Atlantic during the January-March period, trying to assess the potential impact of President Trump's tariffs on the economic activity. On this, the German economy is expected to have contracted 0.2% YoY, contrasting with the 1.2% YoY expected expansion in the broader euro bloc. In the US, the economy is seen contracting at an annualised 0.3% in the same period.
Monetary divergence in focus
Central bank divergence continues to define the transatlantic outlook. In its March decision, the Federal Reserve (Fed) held its target range at 4.25%–4.50%, with Chair Jerome Powell reaffirming the Fed's commitment to taming inflation. Powell also highlighted the risk that new trade tariffs could complicate the policy path, raising concerns about potential stagflation.
By contrast, the European Central Bank (ECB) took a dovish turn, cutting rates by 25 basis points to 2.25% and striking a less restrictive tone in its forward guidance. The ECB’s shift has fuelled expectations of another rate cut as early as June, widening the policy gap with the Fed.
Speculative positioning still favours the Euro
Commitment of Traders (CFTC) data for the week ending April 22 showed that net long positions in the euro eased slightly to around 65K contracts—still holding near multi-week highs. Commercial hedgers remained net short at approximately 118K contracts, while open interest climbed to a six-week peak near 720K contracts, suggesting ongoing interest in Euro exposure despite the dovish pivot by the ECB.
Technical setup: Eyes on 2025 highs
EUR/USD faces immediate resistance at the 2025 peak of 1.1572, followed by the 1.1600 mark and the October 2021 high at 1.1692. On the downside, temporary contention is seen at the 55-day SMA at 1.0900, with stronger backing at the 200-day SMA at 1.0776 and the weekly trough of 1.0732 (March 27).
Momentum indicators favour the bulls, with the Relative Strength Index (RSI) hovering near 60, and the Average Directional Index (ADX) around 51, both pointing to a solid underlying trend.
EUR/USD daily chart
Outlook: Headline risk to keep traders on edge
With monetary policy diverging and trade uncertainty still looming, EUR/USD is likely to remain vulnerable to headline-driven swings. Until there is clearer guidance from central banks or a breakthrough in US-China negotiations, volatility will likely remain a defining feature of the market.
- EUR/USD embarked on a consolidative range supported by 1.1300.
- The US Dollar gathered extra steam despite discouraging US data releases.
- Flash Inflation Rate in Germany came in above consensus at 2.1% YoY in April.
The Euro (EUR) added to Tuesday’s retracement against the US Dollar (USD), triggering the second consecutive daily drop in EUR/USD, which revisited the 1.1320 zone, or weekly troughs, on Wednesday.
The US Dollar Index (DXY), in the meantime, remained well bid, revisiting the 99.60 zone, where initial resistance seems to have emerged.
Trade optimism meets investor caution
The greenback found some support as markets digested renewed White House rhetoric suggesting a possible easing of trade tensions with China. However, traders remained cautious, with scepticism persisting over the lack of concrete progress behind the scenes. Optimism around tariffs may be fading as market participants demand more than verbal reassurances.
Speaking about trade, investors closely watched the release of advanced prints of GDP figures on both sides of the Atlantic during the January-March period, trying to assess the potential impact of President Trump's tariffs on the economic activity. On this, the German economy is expected to have contracted 0.2% YoY, contrasting with the 1.2% YoY expected expansion in the broader euro bloc. In the US, the economy is seen contracting at an annualised 0.3% in the same period.
Monetary divergence in focus
Central bank divergence continues to define the transatlantic outlook. In its March decision, the Federal Reserve (Fed) held its target range at 4.25%–4.50%, with Chair Jerome Powell reaffirming the Fed's commitment to taming inflation. Powell also highlighted the risk that new trade tariffs could complicate the policy path, raising concerns about potential stagflation.
By contrast, the European Central Bank (ECB) took a dovish turn, cutting rates by 25 basis points to 2.25% and striking a less restrictive tone in its forward guidance. The ECB’s shift has fuelled expectations of another rate cut as early as June, widening the policy gap with the Fed.
Speculative positioning still favours the Euro
Commitment of Traders (CFTC) data for the week ending April 22 showed that net long positions in the euro eased slightly to around 65K contracts—still holding near multi-week highs. Commercial hedgers remained net short at approximately 118K contracts, while open interest climbed to a six-week peak near 720K contracts, suggesting ongoing interest in Euro exposure despite the dovish pivot by the ECB.
Technical setup: Eyes on 2025 highs
EUR/USD faces immediate resistance at the 2025 peak of 1.1572, followed by the 1.1600 mark and the October 2021 high at 1.1692. On the downside, temporary contention is seen at the 55-day SMA at 1.0900, with stronger backing at the 200-day SMA at 1.0776 and the weekly trough of 1.0732 (March 27).
Momentum indicators favour the bulls, with the Relative Strength Index (RSI) hovering near 60, and the Average Directional Index (ADX) around 51, both pointing to a solid underlying trend.
EUR/USD daily chart
Outlook: Headline risk to keep traders on edge
With monetary policy diverging and trade uncertainty still looming, EUR/USD is likely to remain vulnerable to headline-driven swings. Until there is clearer guidance from central banks or a breakthrough in US-China negotiations, volatility will likely remain a defining feature of the market.
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