Key Points:
- EUR/USD declines to 1.0836 as ECB signals no clear policy direction.
- Market focus shifts to 1.0725, the 200-day moving average, as next major support.
- USD strength persists amid Fed’s cautious stance on rate cuts.
Euro Weakens as ECB Remains Data-Dependent
The EUR/USD pair continued its downward trajectory, closing at 1.0836 after hitting an intraday low of 1.0819. This decline followed European Central Bank (ECB) President Christine Lagarde’s neutral stance in her speech to the European Parliament, reinforcing a strictly data-dependent approach to future policy decisions.
With tariff uncertainties and fiscal stimulus concerns weighing on sentiment, Lagarde refrained from providing any clear forward guidance, leaving the euro vulnerable to further downside pressure. Our research desk expects limited ECB intervention before key economic data determines the next directional move for the euro.
Technical Analysis
The EUR/USD pair has shown a clear downward trend, dropping from a recent high of 1.09173 to a session low of 1.08146. The pair has struggled to maintain upward momentum, as seen in the downward slope of the moving averages (MA 5,10,30), which indicates sustained bearish pressure. The MACD indicator confirms this, with the signal line remaining below the MACD line, reflecting continued negative momentum.
Picture: EUR/USD struggles near support at 1.08150 with bearish momentum persisting, as seen on the VT Markets app
For now, support is forming around 1.08150, which prevented further losses. If the pair breaks below this level, it could open the door to further downside movement. On the upside, resistance is seen at 1.08550, and a break above this level might indicate a potential recovery. Traders should watch for consolidation or another leg lower, especially if the dollar maintains strength.
ECB vs. Fed Policy Divergence
The Federal Reserve’s steady stance on rates, combined with a hawkish tone from Chair Jerome Powell, has helped sustain U.S. dollar strength. While the Fed is expected to cut rates later this year, policymakers remain reluctant to move quickly, keeping the dollar supported.
Conversely, the ECB’s reluctance to provide clear guidance leaves the euro exposed to downside risks, particularly if upcoming inflation data fails to justify a policy shift. The market’s next major test for EUR/USD lies at 1.0725, a breach of which could open the door for further losses toward 1.0650.
Euro Vulnerable to Further Declines
With a light economic calendar on Friday, traders will look ahead to U.S. and eurozone inflation data for the next major move. If the dollar continues to hold its gains, EUR/USD may struggle to regain bullish momentum, keeping the 1.0800-1.0725 range in play.
For now, euro bears remain in control, with technical indicators favoring further downside unless key resistance levels are reclaimed.
