The Euro is currently having issues trying to make a determined move, but seems to be a bit weak at the moment.
EURUSD
The Euro is currently navigating a policy divergence type of landscape while the US dollar remains resilient due to US labor market stabilizing. The European Central Bank is providing an unexpected tailwind. Unlike the Fed, which now markets price in 3 rate cuts in 2026 starting in maybe May or June, the ECB is signaling that they are going to hold for the remainder of the year.
This relative hawkishness coming out of Frankfurt, combined with Eurozone current account surpluses, is keeping the well supported pair above the 1.18 level for the time being. That being said, there are a lot of questions to ask about where we go from here, and you should continue to look at this as a pair that might be positive over the longer term, but it is going to be a grind.
I am not looking for big numbers here. If we break down below the 50-day EMA, I start to buy the US dollar, not necessarily here, but in other pairs. I think it would really clean up against some of the laggards out there as far as economics are concerned, such as Switzerland, Canada, or the Japanese Yen.
Technical Outlook and Potential Targets
If we do break down from here below the 50-day EMA, we could test the 200-day EMA, which is closer to the 1.1565 level. Rallying from here makes a bit of sense, but again, this is a neutral to slightly bullish scenario. When I say slightly, I am probably thinking about a 60% bullish 40% bearish scenario.
This is a market that will be very slow and deliberate but buying dips should work for the short term. I am not looking for big moves. The entire move that I think is possible at this point is 1.23, which could take months. That could be a middle of the summer thing once the Federal Reserve really starts to give the market what it wants as far as rate cuts.
If we continue to see labor and inflation in the United States support the idea of the Federal Reserve holding still, that could cause some downward pressure.
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