- The EUR/USD outlook shows solid bullish momentum.
- More spending in the Eurozone will likely heat inflation.
- The European Central Bank will likely cut rates by 25-bps.
The EUR/USD outlook shows solid bullish momentum as market participants keep digesting the impacts of Germany’s 500 billion euro fund. Meanwhile, the dollar remained weak after news of a partial pause in tariffs on Canada and Mexico.
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The euro rallied to a four-month high on Thursday, extending the previous session’s rally. The outlook for the Eurozone economy brightened after Germany announced a 500 billion euro infrastructure fund. Top officials are ready to change borrowing rules to achieve this.
More spending in the Eurozone will likely heat inflation, forcing the European Central Bank to pause its rate cuts. Consequently, bond yields soared. However, market participants are gearing up for the ECB policy meeting. The central bank will likely cut rates by 25-bps. Moreover, traders will focus on the messaging after the meeting for clues on future moves. A dovish meeting might pause the current rally. On the other hand, a cautious tone will propel EUR/USD higher.
Meanwhile, news that Trump had paused some tariffs on Canada and Mexico weakened the dollar. The US paused tariffs on automakers in Canada and Mexico, raising hopes of further negotiations.
EUR/USD key events today
- Euro Summit
- Main Refinancing Rate
- Monetary Policy Statement
- ECB Press Conference
- US Unemployment Claims
EUR/USD technical outlook: Bulls extend rally but near exhaustion levels
On the technical side, the EUR/USD price has continued its steep rally past the 1.0701 key level. The price now trades well above the 30-SMA, with the RSI deep in the overbought region. Therefore, the bullish bias is strong. However, the move up has been steep, with no pauses or pullbacks. Thus, bulls might be getting exhausted.
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A pause or a pullback might come at the nearest resistance to allow bulls to rest. In such a case, the price would enter a period of consolidation or pull back to retest the 30-SMA. If bulls remain in the lead, the price will continue higher after a pause. However, if bulls are too weak to continue higher, the price will break below the 30-SMA to indicate a bearish shift in sentiment. For now, the uptrend will continue as long as the price stays above the SMA and the RSI above 50.
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