The EUR/USD pair rose over 1% in Asian trading on Monday, surpassing the 1.1500 level for the first time since November 2021. This upward movement stems from persistent selling of the US Dollar, driven by concerns about a US recession and the Federal Reserve’s status.
Challenges in trade negotiations between the US and the EU and tensions from the US-Sino trade war continue to pressure the US Dollar. The trade conflict sees actions from China on Boeing and US investigations into mineral imports, further impacting the currency.
Future Trading Volatility
Future trading may experience volatility due to thin market conditions over Easter Monday. Overbought conditions on the daily chart might result in cautious buying before the release of Eurozone preliminary business PMI data.
The table reveals that the Euro gained 1.01% against the US Dollar and varied percentages against other major currencies. Euro was notably strong against USD while changes against others varied, reflecting differing dynamics in currency markets.
These recent shifts in the EUR/USD exchange rate underscore a broader rebalancing of expectations around US monetary policy and trade risk perception. With the Euro rising over 1% and clearing levels not touched since late 2021, we’re not merely witnessing technical breakouts – the strength of this move reflects deeper discomfort regarding the US economic outlook.
What’s worth noting here is the repeated undershooting of US data, fuelling bets on rate cuts rather than hikes. This sentiment is now settling in. Powell’s stance, while measured, no longer assures markets in quite the same way it once did. As US recessionary concerns grow louder, the dollar slides not from panic, but rather a weary recalibration of where growth and yield differentials are heading.
Impact of Trade Tensions
Alongside this, the fallout from the slowing US-China trade dialogue – especially the targeted retaliations involving aerospace and metals – has prompted investors to seek safety elsewhere. Without needing to dwell too much on any one headline, what becomes clear is that the broader trade climate is no longer providing the dollar with the haven status it once could rely upon, at least not consistently. Europe, despite its patchier optimism, benefits in comparison.
From a trading perspective, the thin volumes around the Easter Monday holiday could explain the ease with which EUR/USD sliced through resistance. But that also means pullbacks may hit with disproportionate force. Momentum rarely runs unchecked forever, and given that RSI measures show overbought conditions on the daily charts, we would be watching for signs of near-term exhaustion – particularly as shorter-term longs may eye profit-taking opportunities.
The flash Eurozone PMI data expected this week will likely be the next stress test for bullish positioning. A weaker read could temper upside enthusiasm, even if the broader medium-term bias has now shifted in the Euro’s favour. On the other hand, stronger business sentiment could invite another round of upside targeting 1.1600, especially if dollar bears maintain pressure.
A glance across the board shows the Euro gaining differently relative to other majors. That difference is worth keeping an eye on. Where the Euro is moving more cleanly higher, it’s often against currencies that are linked closely with the US economy or whose central banks are perceived as trailing behind in policy moves. That tells us the current rally isn’t evenly distributed, and traders should be wary of blanket assumptions. Instead, it’s best to isolate trades that show both direction and a definable catalyst, rather than chasing broad Euro strength without scrutiny.
Volatility levels, as they currently stand, remain subdued but not silent. Implieds are creeping higher, particularly on short-dated euro calls, which is consistent with the market eyeing more upward movement, or at the very least protection against it. That’s telling us where option flows are leaning. We’ll need to monitor these moves especially as we return to normal volumes.
