The EUR/USD pair saw a strong bullish performance this week, primarily due to positive Eurozone economic data, which eased concerns about potential rate cuts from the European Central Bank (ECB). The pair’s climb was also aided by a diminishing impact from US President Donald Trump’s tariff threats, which had previously weighed on market sentiment.
Eurozone Economic Data Supports the Euro
The upbeat economic data from the Eurozone, particularly from France and Germany, signaled a recovery in business activity. This development reduces the likelihood of the ECB needing to cut interest rates anytime soon. Trump’s tariff threats, which had previously raised concerns about a weaker Eurozone economy, faded during the week, providing further support to the Euro.
Key US Economic Data to Shape EUR/USD Outlook
Looking ahead, next week’s key events for EUR/USD will center on US economic reports, specifically durable goods orders and GDP figures. These reports will provide further insight into the outlook for Federal Reserve rate cuts this year. Over the past two weeks, US economic data has suggested a slight slowdown, which could lead to increased expectations for Fed rate cuts and a weaker dollar. Conversely, positive data could dampen rate cut expectations and boost the greenback.
Economists expect the Federal Reserve to keep interest rates unchanged during its Wednesday meeting, but traders will closely monitor the tone of the meeting for clues on future monetary policy.
EUR/USD Technical Outlook: Bulls Eye 1.0603 Resistance
On the technical front, the EUR/USD has broken above the 22-period Simple Moving Average (SMA), signaling a shift towards bullish sentiment. This break comes after the pair’s previous downtrend stalled at the 1.0200 support level, with the bearish momentum showing signs of exhaustion. A bullish divergence in the Relative Strength Index (RSI) further supports this shift.
With the break above the SMA, bulls are now targeting the 1.0603 resistance level. If this level holds, we could see a pullback to the SMA before further upward movement or a possible retreat to the 1.0200 support level. A successful break above 1.0603 would mark the beginning of a new bullish trend and open the door to the next resistance at 1.0926.
Outlook Summary
The EUR/USD outlook remains positive in the near term, bolstered by improving Eurozone economic data and reduced tariff threats. US economic reports next week will be critical in shaping expectations for Fed rate cuts and influencing the dollar’s performance. Technically, EUR/USD bulls are eyeing the 1.0603 resistance level, with potential for further gains if the pair can clear this hurdle.
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