The Euro (EUR) has risen by 0.2% against the US Dollar (USD) yet is outperforming only the Canadian Dollar (CAD) and the Swiss Franc (CHF) in the G10 currencies. Economic data such as Germany’s ZEW business sentiment survey will play a role in shaping market perceptions.
The easing of trade tensions is shifting the market’s focus back to fundamental aspects and the European Central Bank’s upcoming meeting. The bank is widely expected to cut the deposit rate by 25 basis points to 2.25%.
Trading Levels and Indicators
Forex market dynamics show that EUR/USD is trading near early 2022 levels, with potential to reach 1.15. Any momentum is overbought above 70, and the Relative Strength Index is nearing 77, suggesting potential near-term support in the mid-1.12s and resistance in the mid-1.14s.
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What’s already been outlined above presents a clear near-term structure for those of us tracking EUR/USD with any degree of seriousness. The 0.2% lift places the euro somewhere above where it started the week, but still among the weaker edges of the G10, just ahead of the loonie and the franc. That marginal gain paints a deceptive picture of strength. It’s neither robust nor fading, but rather caught in transition, pending new data and policy guidance.
Germany’s ZEW business sentiment survey now steps forward as a driver, not in isolation, but as part of a wider return to fundamentals. Without the distraction of trade-related headlines, the market is refocusing on the core storylines—data and central banks. In this environment, short-term speculation tends to react faster to macro prints like ZEW, especially with positioning already stretched on both sides of the EUR/USD trade. We expect shorter-term volatility spikes if the reading surprises in either direction, particularly given the RSI pointing just under 77. That’s not subtle—it suggests conditions are overheating and a pullback is likely as broader markets reassess.
Central Bank Decisions and Market Expectations
The European Central Bank is widely expected to trim the deposit rate by 25 basis points, which would bring it to 2.25%. Any deviation from that consensus—or surprise in the tone of delivery—could push EUR/USD through existing boundaries. More hawkish language might embolden euro bulls, whereas a dovish lean could rein in current expectations and trigger some unwinding. Either way, it’s not the cut itself that markets will trade—it’s the surrounding comments and projections that hold sway in driving direction.
For our positioning, that range between mid-1.12s and mid-1.14s becomes critical, acting as the field on which this will likely play out over the next several sessions. Support in the mid-1.12s isn’t just technical; it’s where previous buy interest re-emerged during quieter conditions. Resistance pressing into the mid-1.14s needs stronger conviction from buyers, particularly if momentum remains overbought at these levels. If we see a clean break above, 1.15 opens up, but only if fundamentals justify it—stretching valuations without data support rarely lasts.
Market volatility driven by policy shifts should not be underestimated. Even when outcomes are as expected, the journey there still brings fluctuations in pricing, especially in rates-sensitive pairs like EUR/USD. That risk isn’t abstract—it shows up in daily ranges, spreads, and intraday reversals. Watching volume and what real money does around data releases will be more useful than simply reacting to headlines.
In summary, staying grounded in actual numbers and price behaviour will serve better than leaning too heavily on speculation. Elevated RSI levels, the ECB’s front-loaded event risk, and the return of growth-based data points reinforce caution. Leveraged positions against or with the trend will require tighter stops. Maintaining timeframe discipline becomes more important now, as setups shift intraday within clearly defined structural zones.
