H2: EUR/USD Surges Beyond $1.15 as Dollar Confidence Collapses
H3: How High Can EUR/USD Go Before the Rally Exhausts?
The EUR/USD currency pair has torn through the $1.1500 barrier, marking its highest level since November 2021. In Monday’s session, the euro climbed 1.25% to $1.1533, registering a sharp intraday rally with a low at $1.1391. This breakout isn't just psychological — it's technically and fundamentally backed. The pair now trades in the upper half of its multi-week range, aiming toward the next resistance band at $1.1563 and $1.1603. The breakout comes after EUR/USD spent weeks carving higher lows along a steepening trendline dating back to March 3, pushing the technical structure firmly into bullish territory.
H3: Momentum Confirms the Trend — But Is a Pullback Coming?
Momentum readings show a market running hot, but not yet reversing. The Relative Strength Index (RSI) prints at 75.04, clearly in overbought territory, but still climbing. That’s supported by the ADX — a gauge of trend strength — now hovering just under 50, its highest since November 2024, pointing to an intensifying uptrend. The Moving Average Convergence Divergence (MACD) remains firmly positive and continues to issue a buy signal, while the Williams %R at -7.99 and Stochastic %K at 88.0 suggest there’s still headroom for more upside before the pair runs into serious exhaustion. If EUR/USD does pause, key short-term supports are seen at $1.1497, $1.1437 and $1.1290. Below that, $1.1179 and $1.0918 serve as deeper technical buffers.
H3: ECB Rate Cut Strategy Reinforces Euro Resilience
The bullish wave is even more surprising given the dovish shift from the European Central Bank. On April 17, the ECB cut interest rates by 25 basis points, bringing the benchmark down to 2.25%. In normal cycles, rate cuts weigh on a currency. Not this time. The euro has surged since the decision, as markets interpret the move not as weakness, but as preemptive economic shielding amid growing global headwinds. ECB President Christine Lagarde emphasized that inflation has cooled to 2.2% — right near target — and the central bank is acting to protect growth, especially with trade instability rising. Markets are now pricing in an 81.5% chance of another rate cut to 2.0% at the June 4 meeting. While such a path could typically deflate the currency, the current environment — where rate cuts are interpreted as proactive — has fueled resilience in the EUR/USD rather than weakening it.
H3: Dollar Weakness Deepens as DXY Hits Multi-Year Low
At the heart of the euro’s rise is the staggering collapse of confidence in the U.S. dollar. The U.S. Dollar Index (DXY) has cratered to 98.25 — a level not seen since early 2022. The combination of a political storm surrounding the Federal Reserve and escalating trade retaliation has rattled global confidence in the greenback. President Trump’s aggressive tariff policies pushed import duties on Chinese goods from 54% to a jaw-dropping 125%, with Beijing retaliating at 84% on U.S. imports. These moves have sparked a capital flight from U.S. assets and strengthened the euro’s appeal. Trump’s open threats to remove Fed Chair Jerome Powell have only added fuel to the fire, undermining the independence of the central bank and shaking investor faith in policy stability.
H3: Fed Faces Inflation Trap as Policy Becomes Reactionary
While the ECB moves with transparency and market expectations, the Federal Reserve is caught in an uncomfortable bind. Powell has openly warned that tariff-driven cost pressures are likely to reignite inflation while simultaneously weighing on growth — a toxic combination. San Francisco Fed President Mary Daly added further caution, suggesting rate cuts may be needed but inflation risks tied to geopolitical tensions could force restraint. That wait-and-see stance has done little to support the dollar, and the result is a vacuum where investors are exiting U.S. assets and rotating into euro-denominated holdings.
H3: EUR/USD Technical Setup Points to Higher Highs if $1.1563 Breaks
Technically, EUR/USD is pressing the upper limits of its current range. The pair cleared $1.1497 resistance convincingly and is now targeting $1.1563. A close above this could open the path toward $1.1603, then $1.1675. The broader structure is underpinned by an ascending trendline stretching back six weeks, and the price remains well above the 200-day EMA at $1.1156. Every major moving average supports the upside: the 20-day SMA sits at $1.1064, the 100-day at $1.0609, and the 200-day at $1.0759 — all pointing north. Even short-term EMAs like the 10-day, currently at $1.1290, act as dynamic support, reinforcing the view that this move is not a one-off spike but a sustained bullish trend.
H3: Political Risk Fuels Capital Repatriation Toward the Euro
Part of the sharp momentum behind EUR/USD is rooted in structural capital flows. Foreign investors are pulling funds from U.S. assets and repatriating capital to the eurozone, where, despite lower yields, political institutions appear more stable. The chaos surrounding U.S. monetary policy — especially Trump’s move to restructure the Fed — has become a red flag. Investors now perceive eurozone assets as safer, at least relatively. That perception is reshaping FX exposure, as funds shift out of the dollar and into currencies like the euro and yen, both of which are gaining traction on haven flows.
H3: Volatility Risks Still Loom but Support Levels Hold Strong
Even with bullish momentum intact, risks remain. The overbought RSI and divergence suggest a possible near-term cooling. If a pullback occurs, key levels include $1.1497, $1.1437, and $1.1290. A deeper correction could test $1.1179, but breaking that would require a significant shift in macro narrative — likely a political resolution in the U.S. or a surprise ECB hawkish pivot. For now, neither is on the table. As long as EUR/USD stays above $1.1500, the bulls control the narrative.
Verdict: EUR/USD is a Strong Buy with Eyes on $1.1600 and Beyond
The surge above $1.15 is more than a technical breakout — it’s a reflection of deep macro realignment. With the dollar melting under trade war stress, institutional instability, and an uncertain Fed outlook, the euro is gaining on both momentum and credibility. The dovish ECB doesn’t weaken the euro — it strengthens it in a fragile global context where proactive monetary policy is interpreted as foresight. As long as DXY remains under 99 and rate cut probabilities in the U.S. rise, EUR/USD has room to extend higher. Above $1.1563, the pair targets $1.1603, with a longer-term outlook toward $1.1675. Based on the confluence of technical strength, macro resilience, and capital flow momentum, EUR/USD is a buy — and any retracement toward $1.1430 or below is an opportunity, not a red flag.
