Overview
The Euro has shown notable strength since early March, climbing to 1.0976 and extending its breakout above a multi-month consolidation zone. However, this bullish momentum is not a function of Eurozone resilience, but rather a consequence of accelerating weakness in the U.S. Dollar. Let’s take a look at the technicals.
Fundamental Backdrop – USD Drives the Narrative
The Euro’s strength must be interpreted through the lens of Dollar weakness:
Rising Recession Fears in the U.S.
- U.S. equities have entered correction territory, with the Dow and S&P 500 suffering from rapid de-risking.
- Bond markets are aggressively pricing in slower growth ahead, pushing yields lower and eroding USD demand.
Federal Reserve’s Dovish Pivot Expectations
- Although the Fed remains rhetorically hawkish, markets are front-running cuts later this year due to:
- Slowing job creation
- Lower inflation prints
- Risk-off sentiment from equities
- Fed Funds futures now reflect a greater probability of rate cuts starting Q3 2025.
Real Yields Have Peaked
- 10-year real yields have started to roll over after months of ascent.
- This is structurally bearish for the dollar and tends to support alternative currencies like the euro and gold.
Weekly Chart (Macro Structure)
- Price has been stuck inside a consolidation zone and pushed up to 1.1250 as the Dollar tanked 8% since January.
- Now, Euro is testing the 1.0975–1.1250 resistance band, an area where rallies repeatedly failed in 2022–2023.
- A weekly close above 1.1050 would be significant and shift the macro bias to bullish continuation.
Observation: This breakout is the cleanest structural advance in over a year, and confirms bulls are in control unless price falls back below 1.0800.
Daily Chart (Short-Term Dynamics)
RSI Momentum:
- RSI at 60.36 is bullish but not yet overbought.
- Shows room for a continued move higher, but daily candles are beginning to compress so there is possible near-term consolidation before any extension.
Price Action:
- Euro printed a series of strong impulsive candles above the March range but has now paused just under 1.10.
- The lack of follow-through over the last few days may be profit-taking or a reaction to technical resistance from the weekly chart.
Trade Opportunities
Swing Long (On Retest)
- Setup: Buy retest of 1.0870–1.0920
- Stop: Below 1.0800 (weekly resistance turned support)
- Target: 1.1125 → 1.1250
- Timeframe: 1–3 weeks
- Conviction: High (structural breakout + macro USD weakness)
Summary
| Factor | Signal |
|---|---|
| Weekly Structure | Bullish |
| Daily Price Action | Consolidating below resistance |
| Dollar Fundamentals | Bearish |
| Risk Appetite | Risk-off, euro benefitting |
| Ideal Trade Bias | Buy dips |
Unless the dollar reverses due to a surprise hawkish Fed development or macro shock, the euro is poised to grind higher into the 1.11–1.1250 resistance zone.
All eyes on U.S. CPI later this week—a hot print could temporarily bolster the dollar, but the broader setup continues to favor EUR upside amid macro softness in the U.S. economy.
