EUR/USD Holds Firm Above 1.1250 Amid Dollar Weakness and Policy Divergence

The EUR/USD currency pair continued its upward climb in the European session on Tuesday, reclaiming the 1.1250 level and extending gains from the previous day. The move comes as the US Dollar faces renewed pressure due to mounting fiscal concerns and uncertainty over U.S. trade policies.

Moody’s recent downgrade of the U.S. sovereign credit rating has sparked fresh skepticism in global markets, weakening the dollar’s appeal and giving the euro an opportunity to recover.

🔍 Technical Overview: Resistance Looms Near 1.1270

Despite holding above 1.1250, the Relative Strength Index (RSI) on the 4-hour chart has slipped below 60, suggesting a cooling in bullish momentum.

Immediate resistance is clustered around 1.1270, where several technical levels converge:

100-period Simple Moving Average (SMA)
200-period SMA
38.2% Fibonacci retracement of the latest rally

If EUR/USD clears this zone and confirms it as support, bulls could push the pair toward 1.1300, with an extended target near 1.1380 (23.6% Fibonacci retracement).

Support levels to watch:

1.1200 (psychological and static support)
1.1170 (50% Fibonacci retracement)
1.1080 (61.8% Fibonacci retracement)

🧭 Fundamental Insights: ECB and Fed Policy Comments in Focus

With no major economic reports scheduled for today, traders are closely watching central bank commentary for clues on future monetary policy.

ECB’s Isabel Schnabel acknowledged that inflation is moderating but cautioned that trade tariffs may lead to renewed price pressures over the medium term.
From the Fed side, policymakers continue to preach patience:
- Atlanta Fed President Raphael Bostic expects only one rate cut in 2025
- Vice Chair Philip Jefferson and Minneapolis Fed’s Neel Kashkari echoed cautious tones, emphasizing the need for more data before making policy changes

This divergence in tone between the Fed and ECB may continue to limit EUR/USD’s upside, especially if Fed officials signal restraint regarding rate cuts.

📅 Key Events to Monitor (May 20):

Time (GMT)	Event	Region
10:00	ECB’s Cipollone Speech	EUR
12:30	Canadian CPI (MoM & YoY)	CAD
12:55	Redbook Index (YoY)	USD
13:00	Fed’s Barkin Speech	USD

Later in the day, the European Commission’s preliminary Consumer Confidence Index will be released. However, it is unlikely to significantly sway the euro unless the data diverges sharply from expectations.

🔮 EUR/USD Outlook: Eyes on 1.1270 Breakout

The pair remains supported above 1.1250 but faces stiff resistance near 1.1270. A breakout above this level could confirm bullish continuation, while a failure could bring a retest of 1.1200.

Traders should watch for: