The EUR/USD currency pair has extended its bullish momentum, defying economic gravity even in the face of robust US nonfarm payrolls (NFP) data. The pair surged to a high of 1.1825, a level not seen in years, placing it a staggering 16.17% above its year-to-date low.
The ongoing rally reflects broad-based euro strength and US dollar weakness, pushing the USD Index (DXY) to its lowest point since 2022. In this article, the experts at Aurudium unpack the complexities of the topic clearly and thoroughly.
Dollar Sinks Despite Strong Jobs Data
The rally in EUR/USD was particularly notable last week as it occurred even after the Bureau of Labor Statistics (BLS) reported a surprisingly strong NFP figure. The US economy added 147,000 jobs in June, surpassing the consensus forecast of 100,000 jobs.
This came in stark contrast to the ADP private payrolls report, which estimated a 33,000 job loss, causing confusion and highlighting discrepancies between government and private data sources.
Despite this solid print, investor reaction favored a bearish outlook on the US dollar. Traders interpreted the mixed data in the context of a slowing economic cycle and sticky inflation, recalibrating their expectations for Federal Reserve monetary policy.
Market sentiment now indicates that the Fed is unlikely to cut rates in July but is increasingly expected to pivot in September.
ECB Policy Outlook and EU Retail Sales Data
On the eurozone front, the upcoming retail sales data will offer further insight into the bloc’s economic resilience. Analysts forecast a monthly decline of 0.8% in May, down from +0.1% in April, with annualized retail growth slowing to just 0.1%, compared to 2.3% previously.
While these figures may suggest softening consumer demand, their overall impact on EUR/USD is expected to be moderate. This is largely because investors are already pricing in a pause in ECB policy changes, anticipating that the European Central Bank will hold interest rates steady in its upcoming meeting.
Upcoming Catalysts: FOMC Minutes and Trade Developments
Beyond economic data, key event-driven catalysts lie ahead for the EUR/USD pair, particularly the FOMC meeting minutes. These minutes will shed light on the Fed’s internal policy debates, especially around the timing and magnitude of future rate cuts.
If the minutes hint at increasing dovish sentiment, the dollar could continue to weaken, providing further tailwinds for the euro.
Additionally, attention is shifting toward the trade negotiations between the US and the EU, particularly on pending tariff decisions. A breakthrough agreement, especially one that de-escalates transatlantic trade tensions, could deliver another boost to the euro, reinforcing the pair’s upside bias.
EUR/USD Technical Analysis
From a technical perspective, EUR/USD remains strongly bullish. The daily chart highlights the pair’s recent breakout above the key resistance level at 1.1572, a previous swing high from April 21. This breakout has effectively invalidated a double-top pattern, which is a bearish reversal formation.
The price action is being supported by both the 50-day and 100-day Exponential Moving Averages (EMAs), which have acted as reliable dynamic support levels. The fact that the pair is holding above these moving averages indicates that upward momentum remains intact.
On the momentum front, both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators continue to signal bullish momentum. The RSI is comfortably above the 50-level, while the MACD histogram is in positive territory with a widening gap between the MACD line and the signal line.
Short-Term Outlook: Minor Pullback Before Resumption
While the technical setup supports continued upside, short-term pullbacks are highly plausible. Traders should watch for a potential retest of the 1.1572 level, which has now flipped into support after serving as a resistance zone.
A successful rebound off this level could provide a buying opportunity for traders looking to align with the broader bullish trend.
If bearish pressure intensifies, further support may be found near the 50-day EMA, offering another entry point for long positions. However, as long as the pair remains above the 1.1500 psychological level, the uptrend structure remains intact.
Conclusion: Structural Euro Strength vs USD Weakness
The sustained rally in EUR/USD reflects a blend of structural euro resilience and broad US dollar vulnerability. While the US economy remains relatively strong, growing concerns about peak interest rates, combined with the prospect of Fed policy easing, have weighed on the dollar. Simultaneously, relative ECB policy stability and the resolution of EU-US trade disputes could further bolster the euro.
Looking ahead, traders should closely monitor the FOMC minutes, eurozone retail sales, and developments on tariff negotiations, all of which could serve as pivotal drivers for the next leg in this forex signal.
