Euro (EUR) is stabilising within a narrow range in the 1.09s, showing a slight uptick against the US Dollar (USD) while lagging behind other G10 currencies. This occurs amid overall USD weakness.
The upcoming ECB decision next Thursday has become a focal point, with some policymakers advocating for easing due to recent trade tensions. The EUR’s support from spreads has decreased, with the fair value estimate dropping to the lower 1.07s from 1.10 on April 3.
Stabilisation And Market Observations
Currently, EUR/USD is maintaining last week’s gains within a narrow band, supported just below 1.09 and facing resistance above 1.11. While momentum remains bullish, it is waning, and the RSI indicates negative divergence, not confirming last week’s highs.
This stabilisation of the euro in the 1.09 range—though showing some mild appreciation against the dollar—is not telling the full story. While the broader weakness in the dollar might normally lend more support, the single currency continues to underperform its G10 peers. That tells us something: even with the dollar on the back foot, the euro hasn’t seized much upside.
What’s pressing here is the shift in interest rate expectations. The European Central Bank meets next Thursday, and the conversation there is shifting. Some members of the Governing Council, motivated by concerns over trade headwinds and sluggish price pressures, now appear more open to loosening policy. In short, the support the euro previously got from yield differentials is fading. That shrinking buffer means downside risks might build up more quickly than before.
We’ve already seen that in valuations. The fair value model—which estimates where EUR/USD should trade based on relative differentials—has moved substantially lower. In early April, that figure hovered around 1.10. Now, it’s edged downward to the lower 1.07s. That’s a fairly steep correction in expectations over the span of just a few weeks and highlights how pricing models are adjusting to macro currents.
Dynamic Positioning And Market Volatility
Despite that, price action tells a slightly different, perhaps stickier, story. The pair is still hovering around the 1.09 level and holding gains from last week, suggesting that some pockets of support remain. However, we can’t ignore what’s happening beneath the surface. The daily chart paints a picture of waning momentum: bullish signals are still intact but less convincing, and the relative strength index—the RSI—is diverging from recent highs. That divergence reflects weakening buying pressure, even as the pair attempts to push higher.
Given all of this, it would be prudent to think more dynamically about positioning. The euro might not collapse outright, but firmness is no longer assured. From our vantage point, it’s not about one major price break, but about where strength fades and where it may re-emerge—possibly lower. If yields remain soft into the ECB meeting, or if policy guidance leans dovish, sustained upside becomes less probable.
Option-implied volatilities remain low across the board, suggesting a market that’s not expecting wild swings. Yet this could actually be a moment when low volatility lulls participants into complacency. Especially if the pricing in short-end rates continues to unwind. For positions looking multiple weeks ahead, delta-adjusted exposure should be kept light, with emphasis on reaction levels near 1.0880 on the downside and 1.1130 on the upside.
Breakouts beyond those bounds will likely require a fresh injection of macro impetus, perhaps in the form of a policy surprise or material shift in growth expectations. Until then, positioning should be tick-by-tick, watching for confirms rather than predicting them.
