EUR/USD Price Analysis – Is the Euro Gaining Momentum or Facing a Deeper Decline?
Euro Recovery Stalls Near 1.0460 – What’s Next for EUR/USD?
The EUR/USD pair has been under pressure in recent weeks, dipping below 1.0400 before staging a mild recovery toward 1.0460. The rebound was largely driven by a weaker U.S. dollar, which retreated following disappointing Personal Consumption Expenditures (PCE) inflation data, reinforcing expectations of a potential Fed rate cut in June. Market pricing now indicates a 79% probability of a rate cut, up from 70% before the inflation report.
However, the euro remains fragile, weighed down by slowing inflation in the eurozone and rising geopolitical concerns. The Harmonized Index of Consumer Prices (HICP) for the euro area came in at 2.4% YoY, below January’s 2.5%, but slightly higher than expectations of 2.3%. This soft inflation print increases the likelihood of an ECB rate cut, with markets currently pricing in 87 basis points of easing by the end of 2025.
Adding to the euro’s struggles, tensions between Ukraine and the U.S. have escalated, after a failed meeting between Trump and Zelenskyy, leading to concerns over whether Washington will continue supporting Ukraine’s war efforts. Eastern European leaders have stepped in to offer aid, but the uncertainty is denting sentiment toward the euro.
Geopolitical Risks Weigh on EUR/USD
Beyond the Ukraine crisis, trade tensions are further complicating the outlook for EUR/USD. Trump’s announcement of 25% tariffs on EU goods is a major risk factor for the euro, as it could hamper European exports and weaken economic activity in the region. Markets are also bracing for the impact of new tariffs on Canadian and Mexican imports, which are set to take effect on March 4th.
Meanwhile, the European Central Bank (ECB) is widely expected to cut interest rates by 25bps at its upcoming meeting. ECB officials remain divided on the pace of policy easing, particularly amid high services inflation, which has been stuck around 4% since late 2023. ECB President Christine Lagarde has maintained a cautious stance, but if growth continues to slow, the central bank may be forced into a more aggressive rate-cut cycle, which could push EUR/USD lower.
On the U.S. side, the Federal Reserve has kept rates steady at 4.25%–4.50%, but comments from Fed Chair Jerome Powell suggest that the central bank is not yet ready to cut rates aggressively. Strong U.S. labor market data and resilient consumer spending could delay rate cuts, supporting the dollar and limiting upside for EUR/USD.
Technical Outlook – Can EUR/USD Hold Above 1.04?
From a technical standpoint, EUR/USD has bounced off its 1.0380 support level, but faces strong resistance at 1.0490 and 1.0530. The pair is currently trading above its 20-day SMA at 1.0425, indicating a mild bullish bias, but remains below its 100-day SMA, which sits near 1.0530.
Momentum indicators are sending mixed signals. The Relative Strength Index (RSI) is hovering around 55, suggesting that bulls still have control, but the Average Directional Index (ADX) remains weak, indicating that the recent uptrend lacks conviction.
If EUR/USD manages to break above 1.0500, further upside toward 1.0572 and 1.0629 is possible. However, failure to hold above 1.0400 could see the pair retesting last week’s low of 1.0360, with deeper losses potentially extending toward 1.0280 or even 1.0200.
Trading Strategy – What’s the Next Move for EUR/USD?
For traders, the battle between Fed rate cut expectations and ECB policy uncertainty remains the key driver for EUR/USD. The near-term outlook hinges on upcoming U.S. economic data, particularly the ISM Manufacturing PMI, which is projected to drop to 50.5 from 50.9. A weaker-than-expected reading could reinforce expectations of Fed easing, weighing on the dollar and pushing EUR/USD higher.
Conversely, if ECB rate cut expectations intensify or if geopolitical risks escalate, the euro could remain under pressure, with the 1.0400 level at risk of breaking down.
Final Take – Is EUR/USD a Buy, Sell, or Hold?
Right now, EUR/USD remains in a neutral zone, with upside capped by technical resistance at 1.0500 and downside risks growing due to eurozone economic weakness and trade tensions. If the pair fails to hold above 1.0400, the bearish momentum could accelerate, making short positions more attractive.
However, if the dollar weakens further on dovish Fed commentary, EUR/USD could have room to rally toward 1.0570. For now, the best strategy is to wait for a decisive breakout above 1.05 or a breakdown below 1.04 before committing to a directional trade.
With U.S. data, ECB decisions, and geopolitical developments shaping the outlook, traders should stay cautious as volatility in EUR/USD is likely to increase in the coming days.
