The Euro (EUR) has seen a slight decline of 0.2% against the US Dollar (USD), trading around 1.08. The Eurozone manufacturing PMI stood at 48.6, slightly below the expected 48.7, while the headline CPI was 2.2% year-on-year, meeting expectations.
The European Central Bank is likely to pause rates at the April 17 meeting, which could support the EUR. Current price action is focused on maintaining levels around 1.08, with support around the mid-1.07s and resistance near 1.0850, displaying a month-long consolidation trend.
Market Impact Risks
Near-term risks centre on upcoming US trade announcements, impacting market movement. The broader trading range has been observed between the low 1.07s and the mid-1.09s.
Given the current positioning in EUR/USD, where the pair hovers just above 1.08, the slight 0.2% retreat does not yet suggest a sharp directional shift. A narrowing fluctuation over the past month between roughly 1.0720 and 1.0950 indicates that traders have remained largely reluctant to establish new dominant positions until clearer macroeconomic catalysts emerge. The recent data points out of the Eurozone, particularly with manufacturing PMI slipping just below expectations, suggest that business sentiment remains soft. Still, with headline inflation meeting forecasts at 2.2%, markets may interpret this as providing sufficient space for the ECB to hold its policy rate steady next week.
Lagarde’s team, therefore, seems content to watch and wait. No urgency appears to be coming from Frankfurt to tighten further, which implies that dovish bets may hold less sway in the immediate term. Support around the mid-1.07s has proven reliable through recent sessions, and there’s been a steady pushback every time EUR/USD threatens to dip beneath it. We view that as a signal: option structures layered around those levels likely remain sticky due to existing hedging flows. Resistance closer to 1.0850 has held cleanly, without showing strong momentum or volume to suggest bullish conviction.
Potential Policy And Market Triggers
What may shape positioning more aggressively are the upcoming trade-related statements out of Washington. These carry potential to shift risk appetite broadly and reset expectations on cross-border economic flows. We expect correlation between USD strength and equity sentiment to remain elevated here. Notably, if tariffs or restrictions get announced with real teeth, we anticipate dollar demand to pick up swiftly, particularly in risk-off scenarios. That could nudge EUR/USD back toward the lower end of the recent range.
Implied volatilities have ticked incrementally higher, though not disproportionately so. That tells us that the market is wary, not panicked. With the ECB likely on hold and inflation holding steady, the bigger swing factor near-term will not come from the Eurozone, but rather from the US side. Unwinding carry trades, however modest, could build momentum quickly if risk breaks down.
At this stage, we remain attentive to intraday flows around the top and bottom edges of the current range. Extending beyond 1.0850 on solid volume would suggest fresh long positioning entering with depth. Conversely, repeated failure to hold above 1.08 – particularly on days when equities soften – should trigger a reassessment from longs who’ve been trading the range. Some may switch to favouring short-dated downside structures or adjust stops toward the lower 1.07 area, especially ahead of potential US surprises.
Until new data disrupts this narrow gridlock, tactical plays within the band continue to offer best utility. There’s no evidence yet of a breakout. Direction remains indifferent. But volatility might not stay dormant for long.
