Services PMI for July registered at 51.0, manufacturing at 49.8, and the composite gauge at 50.9—suggesting recovery, albeit at a moderate pace. Crucially, investors seem unbothered by the recent uptick in U.S. tariffs, betting that the ECB’s accommodative policy stance and persistently subdued inflation will act as a backstop should economic momentum falter. This optimism is reflected in the euro’s latest gains against the dollar.
The U.S. dollar, on the other hand, is under mounting pressure as speculation intensifies over an imminent dovish pivot at the Federal Reserve. At the latest FOMC meeting, officials opted to hold rates steady at 4.50%. However, the Fed’s consensus is looking more fragile: with the resignation of Governor Adriana Kugler and the possibility of a White House-aligned replacement, the risk of a policy shift toward lower rates is growing. Two FOMC members already supported rate cuts, and the changing makeup of the Board may tip the balance further.
Uncertainty is further compounded by escalating U.S. trade disputes with China and India. President Trump recently announced a hike in import tariffs on Indian goods to 50%, citing continued Russian energy imports. As the expiration date for the current trade truce between the U.S. and China looms—with no new deal in sight—market participants are on high alert for any signals that could spark global market volatility.
EUR/USD bullish momentum fueled by eurozone data and dollar weaknessAll told, the balance of risks appears to favor further EUR/USD appreciation, at least in the near term, as investors bet on a benign policy backdrop and resilient regional growth. The ECB’s scope for further monetary easing, if required, remains a key theme, with inflation pressures largely contained across the euro area.
Technical Analysis: Is a Breakout Imminent?
From a technical standpoint, EUR/USD is fast approaching a major resistance at 1.1719 (Murray [8/8]). A clear breakout above this level could open the door for additional upside toward 1.1841 and 1.1963, in line with the broader recovery narrative. Conversely, the downside pivot remains 1.1475; any sustained move below this support could set off a deeper correction toward 1.1230 and 1.0986, areas linked to key Fibonacci retracements and previous reversal points.
- Resistance: 1.1719, 1.1841, 1.1963
- Support: 1.1475, 1.1230, 1.0986
Indicators send a mixed picture: Bollinger Bands are starting to widen downward, MACD is holding in negative territory, while Stochastic is pushing higher into overbought territory—suggesting the rally may be due for a breather, but bullish potential remains if resistance is cleared decisively.
Trading Scenarios & Market Sentiment
- Bullish Scenario: Initiate long positions above 1.1719 targeting 1.1841 and 1.1963. Recommended stop loss: 1.1625. Suitable for a 5–7 day holding period.
- Bearish Scenario: Enter short below 1.1475 with objectives at 1.1230 and 1.0986, and a stop at 1.1590.
Bottom Line: With a supportive macro backdrop in the eurozone and a weakening dollar driven by potential Fed policy changes, the outlook for EUR/USD leans bullish. Market participants should watch for a break above 1.1719, which could trigger the next leg higher as policy divergence and geopolitical risks remain in focus.