Key Points:
- EUR/USD trades at 1.17701, up 0.22%, holding near last week’s four-year high of 1.192.
- ECB officials suggest rate cuts may be done, citing persistent inflation risks.
- The Fed cut rates last week and hinted at another 50bps of easing this year.
The euro held steady above $1.17 on Monday, with EUR/USD trading at 1.17701—just below last week’s peak of 1.192, a level not seen in four years.
The pair is being buoyed by diverging tones from the European Central Bank and the Federal Reserve, with the ECB signalling caution on future easing while the Fed moves steadily toward more cuts.
In its latest commentary, the ECB indicated that its rate-cutting cycle may be at an end, warning that inflationary pressures remain elevated due to structural costs like tariffs, food prices, services, and expansionary fiscal policy.
This hawkish tone, echoed by several board members in recent speeches, has helped support the euro despite global risk headwinds.
In contrast, the US Federal Reserve lowered interest rates last week for the first time since December and suggested it could deliver another 50 basis points in cuts by the end of the year.
Chair Jerome Powell, however, described the move as a “risk management” step, not the start of an aggressive easing cycle—an important nuance that has helped limit dollar weakness.
Macro Calendar in Focus
Traders will closely watch the upcoming HCOB Flash PMI data from the eurozone, expected to provide a real-time snapshot of economic activity in services and manufacturing.
A surprise to the upside could further reinforce the ECB’s case for holding rates, while a weak print could revive dovish speculation.
Monetary aggregates and scheduled speeches from key ECB and Fed officials will also be scrutinised for signs of shifting tone—especially as inflation remains above target in both regions and policymakers attempt to manage softening growth without overcommitting to stimulus.
Technical Analysis
EURUSD is trading at 1.1770, up 0.22% on the day, extending its recent breakout momentum. Since bottoming at 1.0360 in March, the pair has been in a well-structured uptrend, with the 30-day moving average continuing to act as dynamic support.
The current push above the 1.1750–1.1770 zone suggests that bulls are regaining control after weeks of sideways consolidation.
The MACD indicator is tilting bullish again, with the signal line rising above the zero mark, pointing to strengthening momentum. If buyers can sustain pressure, the next target lies at 1.1850, followed by a potential move toward 1.2000 psychological resistance.
On the downside, immediate support sits around 1.1650, with stronger backing near 1.1500, where moving averages converge.
The technical bias remains bullish as long as EURUSD holds above 1.1650, but a failure to clear 1.1850 could see a pullback before further upside.
Cautious Forecast
In the short term, EUR/USD may continue to grind higher toward 1.1800–1.1850 if data out of the eurozone holds steady and ECB rhetoric remains firm.
However, the market’s next leg will likely be driven by US macro data and further rate commentary from Powell and peers.
Medium term, the euro may remain supported as long as the Fed keeps easing and the ECB avoids opening the door to cuts.
That said, if European growth weakens or core inflation starts to fade, the market could begin pricing in ECB easing by early 2026—limiting further gains beyond the 1.2000 region.
