EUR/USD Stalls Near 1.0500 – Can the Euro Sustain Its Gains or Is a Reversal Coming?
Euro’s Rally Faces Resistance as Dollar Stabilizes
EUR/USD is trading at 1.0477, struggling to maintain momentum above 1.0500 after last week's rally. The euro gained ground for five consecutive days, peaking at 1.0515, but the bullish momentum has slowed as the dollar steadies. The key question now is whether the pair can break resistance or if selling pressure will push it lower toward 1.0400.
A sharp 0.9% decline in U.S. retail sales has fueled speculation that the Federal Reserve could pivot toward rate cuts later in 2025. However, Fed Chair Jerome Powell remains cautious, reinforcing that rate reductions will only come when inflation shows sustained progress toward the 2% target. This stance has limited the dollar's downside, keeping EUR/USD range-bound.
Technical Levels: 1.0500 Resistance and 1.0400 Support in Focus
The euro’s recent gains have been supported by technical factors, but strong resistance remains at 1.0515. The 100-day Exponential Moving Average (EMA) at 1.0544 is the next major hurdle, and a decisive breakout above this level could push EUR/USD toward 1.0590.
Conversely, a failure to hold above 1.0460 could trigger a deeper pullback. Immediate support sits at 1.0440, followed by 1.0400, where the 20-day Simple Moving Average (SMA) provides dynamic support. A breakdown below 1.0360 would open the door for a more extended decline.
Momentum indicators suggest a stalling bullish trend. The Relative Strength Index (RSI) at 59 remains in positive territory but has lost upward momentum. The Moving Average Convergence Divergence (MACD) histogram is flat, signaling consolidation rather than strong bullish continuation.
ECB vs. Fed: Diverging Policy Paths Could Shape EUR/USD’s Next Move
The European Central Bank (ECB) remains in focus, with internal divisions emerging over rate policy. ECB policymakers have suggested that rate cuts are on the table, with markets pricing in 75 basis points of easing over the next 12 months. ECB Governing Council member Fabio Panetta has pushed for looser policy, citing concerns that restrictive monetary conditions are weighing on eurozone growth.
On the other hand, the Federal Reserve is maintaining a wait-and-see approach. The latest FOMC minutes, due this week, could provide more insight into how policymakers view inflation risks and the likelihood of rate cuts before late 2025.
If the ECB moves toward rate cuts before the Fed, EUR/USD could face downside pressure, especially if U.S. growth data remains resilient. However, if weaker economic data forces the Fed to shift dovish sooner than expected, the euro could extend its gains.
Geopolitical Risks: Trump’s Trade Policies Add Uncertainty
The Trump administration’s latest tariff threats have created additional uncertainty for financial markets. While a 25% tariff on Canadian and Mexican imports has been delayed, the 10% duty on Chinese goods remains in place. Trump has also hinted at a 25% tariff on steel and aluminum, which could escalate trade tensions further.
If U.S. protectionist policies push inflation higher, the Fed may delay rate cuts, potentially strengthening the dollar and pressuring EUR/USD lower. However, if tariffs weigh on U.S. economic growth, markets could accelerate rate-cut bets, lifting the euro.
Outlook: Will EUR/USD Hold Above 1.0460 or Break Below 1.0400?
EUR/USD is at a critical juncture, with 1.0500 as the key pivot level. A break above 1.0515 could signal a move toward 1.0544, while a failure to hold above 1.0460 would put 1.0400 back into play.
The upcoming FOMC minutes, ECB rate expectations, and geopolitical developments will be the main drivers of the pair’s next move. For now, traders are watching whether the euro can sustain its recent gains or if the dollar regains control, pushing the pair back toward 1.0400.
Decision: Buy, Sell, or Hold?
With mixed signals from central banks and a range-bound technical setup, EUR/USD is currently a HOLD. Bulls need a confirmed breakout above 1.0515, while bears will look for a break below 1.0460 to trigger downside momentum.
Until a clearer catalyst emerges, the euro-dollar pair remains stuck between a fragile bullish trend and lingering downside risks.
