Key Points:
- EUR/USD up 2.4% for the week, reaching 1.1098.
- Markets price in 99bps of Fed rate cuts for 2025 amid recession fears.
The euro climbed strongly to close at 1.10865 on Thursday, gaining 2.4% for the week and marking one of its steepest weekly rallies in over a year. This comes as a sharp repricing unfolds in global currency markets, with the U.S. dollar caught in the crossfire of escalating trade tensions and collapsing trader confidence.
President Donald Trump’s announcement of tariffs ranging from 24% to 54% on key trading partners has spurred widespread concern over a disorderly trade war with no strategic objective. The euro, seen as a relative safe haven in this environment, has surged, with intraday highs touching 1.10984—levels not seen since January.
Technical Analysis
The EURUSD 15-minute chart shows bullish momentum firmly in control after a steady climb from the 1.078 region to a high of 1.11464, before pulling back slightly and consolidating around 1.10865. The trend remains upward overall, with price comfortably above the moving averages (MA 5, 10, 30), which are sloping upward and acting as dynamic support.
Picture: Euro on the rise—bulls hold ground after a strong breakout, eyeing higher levels, as seen on the VT Markets app.
The MACD also supports the bullish sentiment, showing a strong crossover early in the session, followed by a healthy divergence and histogram expansion. While there’s been a recent cooldown, the lines are flattening again—hinting at a possible continuation if momentum returns.
USD Reversal, Fed Dilemma
Markets have aggressively unwound long dollar positions. The greenback is down 2.7% vs. the yen and 3% against the Swiss franc, showing that capital is fleeing the U.S. in anticipation of both policy instability and long-term structural risks.
Fed fund futures now imply 99 bps of rate cuts by December, a reflection of the market’s view that rising unemployment will force the Federal Reserve’s hand—even if inflation rises sharply due to import costs.
That sets up a troubling paradox: the Fed must choose between fighting inflation and averting recession, all while the dollar loses its long-held status as the world’s safe-haven asset.
Cautious Forecast
The path for EUR/USD remains upward-biased if policy chaos in Washington continues. However, volatility is likely to spike around Fed Chair Jerome Powell’s upcoming remarks, which could offer clues as to how the central bank plans to respond to this economic dislocation.
If Powell signals a willingness to “look through” inflation and focus on growth risks, the euro may gather more upside momentum. But a hawkish surprise could trigger a pullback toward 1.1030–1.1000.
In the meantime, traders are watching Apple, supply chain-linked tech firms, and broader global equity flows. The euro remains the current beneficiary of the dollar’s fall from grace—but how long that sentiment lasts will depend on Washington’s next move.
