The EUR/USD pair remains resilient above 1.0800 during European trading on Thursday, driven by weakening US Dollar (USD) momentum and optimism surrounding Germany’s fiscal reforms. However, further upside could be capped ahead of the European Central Bank (ECB) monetary policy decision, which is set to influence market sentiment.
Technical Analysis: EUR/USD Poised for Consolidation?
Key Levels to Watch
- Resistance:
- 1.0900 – Static resistance level, psychological barrier
- 1.0940 – November high, potential breakout level
- Support:
- 1.0760 – Initial static support
- 1.0720 – 200-day Simple Moving Average (SMA)
- 1.0700 – Round level, additional support
The Relative Strength Index (RSI) on the 4-hour chart has surged above 80, signaling that the pair is in overbought territory. Additionally, a daily close above the 200-day SMA (1.0720) for the first time in four months strengthens bullish sentiment.
While the pair is on a strong uptrend, traders should remain cautious as overbought conditions could lead to a temporary pullback before another leg higher.
Fundamental Analysis: Dollar Struggles Amid Risk-On Mood
Despite a strong US ISM Services PMI report for February, the US Dollar remains under pressure due to Trump’s tariff exemptions and ECB rate cut expectations:
1️⃣ US Dollar Weakness – The USD lost traction after President Donald Trump granted a one-month exemption for the US automotive industry from 25% tariffs on Canada and Mexico. This move boosted risk sentiment and weakened demand for the safe-haven greenback.
2️⃣ ECB Decision in Focus – The ECB is widely expected to cut interest rates by 25 basis points (bps) in today’s policy meeting. A dovish tone from ECB President Christine Lagarde could drive the Euro lower, while hawkish comments regarding inflation and growth risks may provide support for the single currency.
3️⃣ Upcoming US Economic Data –
📌 Weekly Initial Jobless Claims (Expected: Moderate impact)
📌 Friday’s Nonfarm Payrolls (NFP) Report (High impact on USD)
Market participants will closely monitor the ECB’s economic projections and any hints of future rate cuts. If Lagarde signals further easing, the Euro may struggle to extend gains, leading to potential profit-taking on long positions.
Short-Term EUR/USD Outlook: Can Bulls Maintain Control?
✅ Bullish Scenario: A break above 1.0900 could push EUR/USD toward 1.0940 (November high), reinforcing the uptrend.
❌ Bearish Scenario: A drop below 1.0760 may expose the pair to further downside toward 1.0720 (200-day SMA) and 1.0700.
📌 Traders should watch for ECB policy comments and upcoming US data releases to determine the next significant move in EUR/USD.
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