The euro has unexpectedly benefitted during the recent trade-driven sell-off of risk assets. Unlike its usual correlation with risk assets, the euro has maintained strength despite bleak eurozone growth prospects.
Upcoming discussions among EU trade officials could lead to retaliatory measures affecting the eurozone. The alternative liquidity offered by the euro may attract attention from European policymakers looking to enhance its appeal to foreign exchange reserve managers.
The EUR/USD faces strong resistance in the 1.11-1.12 range, linked to its bear trend from the 1.60 high in 2008. A decline in US equities may push it further, yet some buyers may emerge around 1.1020 amid concerns regarding the dollar’s status as a store of value.
What we are seeing with the euro pushing higher—even as economic data across the eurozone continues to disappoint—is not following its usual pattern. Normally, when there’s a broad-based sell-off and investors flee risk, the euro tends to drag lower. This time, however, it’s been quite the opposite. And that divergence has raised some eyebrows.
Broadly, this suggests that the market may be reconsidering how it sees the euro during global stress. There are early signs that Europe is trying to increase the currency’s international role. It’s something that had previously been a long-term objective for policymakers, but we’re now getting hints that the process might be accelerating. As officials begin talking about trade retaliation—not unexpected given recent escalations—those outside Europe could start assessing the euro through a new lens.
For traders like us, resistance in the 1.11 to 1.12 area shouldn’t be treated as just a technical barrier—it connects strongly to a historical level dating back to the 2008 reversal. That longer-term downtrend from 1.60 still looms large in the minds of many participants. It’s not unusual for such levels to cap short-term moves, especially when momentum lacks a firm backing from economic fundamentals.
That area could remain heavy in the near term unless there’s a fresh driver—either politically or via incoming US data. Meaningful upside would require more than defensive dollar selling or speculative euro buying; something needs to pressure the greenback more consistently, and that hasn’t materialised yet.
On the downside, there may be limited room for sharp declines below 1.1020, at least for now. This level could be supported by traders rethinking the dollar’s reliability as the global anchor. That shift isn’t just a short-term reaction—it reflects broader unease. Should US equities continue to roll over, the dollar might not benefit the way it used to. That opens a window for the euro, even if it doesn’t surge higher.
We’ll also be monitoring trade rhetoric very closely. Any follow-up comments from EU officials about foreign exchange diversification—especially in the context of reserve assets—could create volatility. Market sensitivity to this type of language has increased lately, suggesting that even tentative remarks might trigger flows.
Derivative traders should be especially mindful of these price zones, particularly as we approach key expiration dates. Bear trendline memory, combined with geopolitical noise and cross-asset positioning shifts, could lead to brief but sharp moves. Patience and precision will likely matter more than directional conviction in the week ahead.
