- EUR/USD reversed part of Wednesday’s strong advance, faltered near 1.1400.
- The US Dollar managed to regain upside impulse amid a bounce in US yields.
- The ECB trimmed its policy rates by 25 basis points, as widely telegraphed.
The Euro (EUR) lost momentum on Thursday, encouraging sellers to return to the market and drive EUR/USD lower following a failed attempt to reclaim the area beyond 1.1400 the figure during early trade.
The pair’s daily pullback followed the marked rebound in the US Dollar (USD), which saw the US Dollar Index (DXY) climb to the 99.70-99.80 band amid a humble rebound in US yields across different time frames.
Trade tensions remain well in place
President Trump’s blanket 10% tariff on all trading partners, coupled with extra duties of up to fifty percent on certain regions and as much as 145% on Chinese goods, kept investors on edge.
A 90‑day tariff pause for countries that choose not to retaliate, plus the White House’s late decision to exempt smartphones and computers from the China list, provided only fleeting relief. European officials warned that Brussels is ready to respond if needed.
Central bank outlook
The Federal Reserve (Fed) held rates at 4.25%-4.50% range, with Chair Jerome Powell pointing to slower growth, tariff‑driven inflation risks and the possibility of rate cuts later this year, while markets now price roughly one full percentage point of easing by December.
It is worth noting that, on Wednesday, Fed Chair Jerome Powell dampened hopes for near-term rate cuts by reaffirming the central bank’s focus on keeping inflation expectations anchored and avoiding a shift from temporary price spikes to sustained inflation. He acknowledged the Fed’s dual mandate but emphasised that lasting employment gains depend on price stability. Powell also cautioned that rising tariffs could create stagflation risks, forcing the Fed to carefully balance growth and inflation goals depending on how far each diverges and how long the imbalances are expected to persist.
Across the Atlantic, the European Central Bank (ECB) delivered a widely expected 25bp rate cut, bringing the deposit rate down to 2.25%. The policy statement dropped the term “restrictive,” signalling that the Governing Council may now view policy as sitting in neutral territory.
As expected, Lagarde avoided committing to a timeline for further easing, sticking to a data-driven, meeting-by-meeting approach. That said, her tone during the press conference came across more dovish than anticipated. The unanimous vote in favour of the cut, the mention (though not support) of a 50 basis point move, and growing concerns over Euro strength and competitiveness have prompted a shift in expectations.
That said, markets have now started to pencil in another 25 basis point cut at the June meeting, where a hold had previously been expected.
Bets positioning
Speculative net‑long euro contracts have risen to a two‑week peak near 60K contracts, while hedge‑fund net‑shorts have grown to about 90K contracts. Total open interest has surged to roughly 700K contracts, indicating ample fuel for a larger move in either direction.
Technical picture
The first meaningful resistance stands at the 2025 high of 1.1473 (April 11). A clear breakout of this level could expose the February 2022 peak at 1.1498, just ahead of the psychologically important 1.1500 level.
On the downside, initial support rests at the 200‑day simple moving average SMA at 1.0753, seconded by the weekly low at 1.0732 (March 27), which appears reinforced by the provisional 55‑day SMA.
Speaking about indicators, the Relative Strength Index (RSI) eased to around 69, exiting the overbought zone, while the Average Directional Index (ADX) above 46 points to a still‑healthy trend.
EUR/USD daily chart
EUR/USD outlook
With the US Dollar’s shine dulled and tariff headlines still flying, the single currency is rebuilding lost ground even as risk appetite swings. Both the Fed and the ECB remain on alert, weighing softer growth data against inflation implications and trade fallout. For now, EUR/USD appears poised for further volatility as each new policy hint, inflation print or tariff announcement hits the tape.
