- The EUR/USD is at 1.1776 after hitting a multi-year peak of 1.1780 due to a weakening dollar.
- Concerns over the U.S. budget deficit and Federal Reserve’s decisions push the U.S. dollar down to multi-year lows.
- Retail sales in Germany heighten concerns about growth for the ECB ahead of remarks from major central banks.
The EUR/USD pair rose to a new high of 1.1780 on Monday, leveraging the situation surrounding the potential approval of the U.S. fiscal budget and ongoing trade negotiations under the Trump administration. At this moment, the pair is trading at 1.1776, marking a 0.51% increase.
The market sentiment remains positive, as reflected in the U.S. equity index, which has reached an all-time high for the second quarter of 2025. With expectations of a rising fiscal deficit, the U.S. dollar has dropped to near multi-year lows, while investors are pushing the euro closer to a four-year high, partly due to an anticipated cut of over 50 basis points by the Federal Reserve.
Additionally, news that the European Union is set to accept Trump’s global tariffs drove the EUR/USD higher. Still, the EU is looking for the U.S. to reduce its commitments in key sectors like pharmaceuticals, alcohol, semiconductors, and civil aviation.
Recent data indicates a significant decline in German retail sales. Policymakers at the European Central Bank (ECB) seem to be increasingly worried about economic growth and appear to be relying heavily on data for their rate-setting decisions.
On Tuesday, Federal Reserve Chairman Jerome Powell will join ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Japan head Kazuo Ueda for a panel discussion.
Daily Digest Market Mover: EUR/USD Rally Continues as Dollar Weakens
- EUR/USD looks poised to test 1.1800. The U.S. Dollar Index (DXY), which measures the dollar against other currencies, is down 0.41% at 96.85, nearing a four-year low.
- If U.S. Congress backs Trump’s substantial infrastructure proposal, the budget deficit may balloon by $3.3 trillion, potentially further weakening the dollar and boosting the euro.
- This week is crucial for U.S. economic data. The June ISM manufacturing PMI is expected to rise from 48.5 to 48.8, while ADP employment figures might improve from adding 37K jobs to an anticipated 85K.
- The upcoming non-farm payroll report for June is expected to show a weakening job market, suggesting that the workforce increased by just 110,000, down from 139,000. The unemployment rate might tick up from 4.2% to 4.3%.
- German retail sales recorded a significant drop of -1.6% in May, missing forecasts of a 3.3% increase.
- ECB’s De Guindos mentioned “brutal uncertainty,” indicating potential stagnation in Q2 and Q3 growth, while every option remains on the table. ECB chief economist Philip Lane noted considerable risks of deviation from the 2% inflation target.
Euro Technology Outlook: EUR/USD Set to Test 1.1800 in Short Term
As buying momentum builds, suggested by the relative strength index (RSI), the trends for EUR/USD are showing continued strength. Current readings indicate that it’s in the overbought territory. However, in a strong trend, numbers in the 70 to 80 range can suggest further upward movement before eventually peaking.
The key resistance level for EUR/USD sits at 1.1800, followed by 1.1850 and 1.1900. If the pair dips below 1.1750, keep an eye out for movements down to 1.1700. Additional support may be found at the next demand zones of 1.1653 and subsequently 1.1600.
