introduction
Euro FX Futures (6E) have surged lately as the Dollar strength diminishes. The recent move is supported by both technical strength and fundamental catalysts, with the euro gaining momentum against the dollar.
As of today, Euro futures are trading at 1.07090, up +0.95%, showing a strong bullish breakout above the 1.06305 resistance level. The move also puts the 100-day SMA (1.05495) firmly below the current price, a structure bulls have been waiting for since October last year.
Fundamental Drivers Behind the Euro’s Surge
1. Hawkish ECB Stance vs. Cautious Fed
- The European Central Bank (ECB) has maintained a hawkish tone, with officials suggesting that further rate hikes are possible to combat persistent inflation.
- In contrast, the Federal Reserve has shown a more cautious approach, as mixed U.S. economic data suggests that the rate-hiking cycle may be nearing its peak.
- ECB President Christine Lagarde recently stated that inflationary pressures remain strong, adding support to the euro.
2. Improved Eurozone Economic Data
- The Eurozone GDP showed better-than-expected growth, and PMI data indicated expansion in both manufacturing and services sectors.
- The labor market remains resilient, and energy prices in Europe have stabilized, reducing recession fears.
3. Weakening U.S. Dollar
- The U.S. Dollar Index (DXY) has pulled back as Treasury yields softened and risk sentiment improved, benefiting the euro.
- The dollar’s weakness has been partially driven by expectations that the Fed may pause rate hikes, especially with U.S. inflation showing signs of moderating.
4. Market Sentiment & Positioning
- Short covering in the euro has added to the recent surge, as bearish traders were forced to cover positions once the 1.06305 resistance broke.
- Futures markets show increased long positions in the euro, suggesting that institutional traders are now positioning for further upside.
Technical Outlook
Bullish Breakout—Momentum Building
- The euro has broken out of a consolidation zone, with price decisively above the 1.06305 resistance.
- The 100-day SMA (1.05495) is now below the price, providing a supportive dynamic level.
- MACD shows a bullish crossover, with momentum accelerating to the upside, confirming buyer strength.
Bull & Bear Scenarios
Bull Case: Continuation Toward 1.09375 and Beyond
- A sustained break above 1.0800 would extend the bullish trend, targeting 1.09375.
- The MACD remains supportive, and bullish momentum is building, with room for further gains if fundamentals align.
Bear Case: Pullback Toward 1.05495
- If price falls back below 1.06305, a retest of the 100-day SMA at 1.05495 is likely.
- A bearish reversal would require a break below 1.05495, shifting focus to 1.03375 support.
Outlook Summary
- Short-Term (1-2 Weeks): Bullish, with the focus on a move toward 1.0800 – 1.09375.
- Medium-Term (1-3 Months): Cautiously bullish, as long as price remains above 1.06305.
- Long-Term (6+ Months): Bullish outlook building, with potential for a larger trend reversal if the euro continues to gain strength.
