EUR/USD Price Forecast: There is mild contention around 1.1270

The euro extended its winning streak on Tuesday, with EUR/USD briefly retesting the 1.1370 zone, where some decent resistance seems to have turned up. The move reflected unabated uncertainty surrounding the US trade policy after President Trump refloated the idea of levies on pharmaceuticals.

Meanwhile, the US Dollar Index (DXY) retreated for the third straight day, revisiting the low-99.00s amid further improvement in the risk mood as well as prudence ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday.

Trade rhetoric resurfaces, but market scepticism prevails

Despite renewed caution surrounding US-China trade relations, investor appetite for risk appears to have been revitalised. However, market participants appeared unconvinced by the latest diplomatic overtures, with many interpreting them as recycled rhetoric lacking substantive policy progress.

The prudent mood tempered the impact of Friday’s strong jobs report, although news that F. Merz became the new German Chancellor after two voting rounds lent renewed optimism to the European currency.

Central banks drift further apart

The Fed and European Central Bank (ECB) continue to move in different directions on policy. While the Fed is widely expected to hold rates steady at 4.25%–4.50% on 7 May, Chair Jerome Powell recently warned that inflation remains too high and signalled potential complications ahead—including from prospective trade tariffs—raising concerns about stagflation risks.

In contrast, the ECB delivered a 25bp rate cut last month, bringing its main policy rate to 2.25%, and adopted a notably dovish tone in its forward guidance. Markets are now pricing in a second ECB cut as soon as June, deepening the transatlantic policy divide and casting a shadow over the single currency’s outlook.

Positioning: Long Euro, for now

Despite the ECB’s shift, speculative interest in the Euro has held firm. As of 29 April, CFTC data showed net long positions rising to a multi-month high of 75.8K contracts, with open interest surpassing 730K contracts—levels last seen in September 2024. Commercial hedgers remained net short by roughly 131K contracts, suggesting lingering caution among corporates.

Technical setup: Resistance in focus

EUR/USD continues to face resistance at the 2025 high of 1.1572, followed by the 1.1600 round level and the October 2021 top at 1.1692. On the downside, the 55-day simple moving average (SMA) at 1.0961 provides the first layer of support, with the 200-day SMA at 1.0785 and March’s low of 1.0732 seen as critical backstops.

Momentum remains constructive. The Relative Strength Index (RSI) sits near 60, leaving room for further gains, while the Average Directional Index (ADX) at roughly 46 indicates a still robust underlying trend.

EUR/USD daily chart

Outlook: Policy guidance, trade news to steer the Euro

Volatility is likely to stay elevated as traders parse messaging from the Fed and ECB amid a fluid geopolitical backdrop. With monetary policy paths diverging and macro data sending mixed signals, EUR/USD is primed for reactive moves—especially if market expectations around inflation, growth, or rate cuts are abruptly repriced.