EUR/USD price prediction: Breakout above 3-month ceiling anticipated
EUR/USD starts March with strong gains, rising 1% to a three-day high.
The EUR/USD price action opened March on a strong note, climbing 1% on Monday to a three-day high and continuing its advance into Tuesday’s European session.
The pair climbed above the 50-day EMA and breached the 1.0460 resistance level, now approaching the critical 1.0530 resistance. This level has repeatedly capped gains over the past three months, making it a key threshold for the pair’s near-term direction.
The rally has been fueled by a shift in Federal Reserve rate expectations. A slowdown in U.S. economic data has driven a sharp 35 basis-point narrowing in the transatlantic two-year yield spread over the past month, reflecting market anticipation of a less aggressive Fed. This is pressuring the U.S. dollar and giving EUR/USD room to climb. Additionally, investor sentiment in Europe has been buoyed by an explosive rally in European defense stocks, further supporting the euro.
EUR/USD price forecast: U.S. tariffs pose downside risk to euro’s recent rally
EUR/USD price dynamics (Nov 2024 - March 2025). Source: TradingView
However, a major headwind is looming. U.S. tariffs pose a significant threat to the eurozone’s open economy. If tariffs are imposed on key European exports, market sentiment could quickly shift against the euro, limiting further upside potential.
The 1.0530 resistance remains a major test for EUR/USD. If the pair fails to break through, a reversal could occur, sending the price back toward the 50-day EMA support. If a breakout does occur, upside potential may still be capped, as the fundamental risks tied to trade tensions could erode confidence in a sustained euro rally.
Overall, while EUR/USD has gained traction, its ability to maintain upward momentum will depend on further developments in U.S. economic data, Fed rate expectations, and the impact of trade policy on the eurozone. Traders should closely watch price action around 1.0530, as rejection at this level could trigger renewed selling pressure.
A weaker U.S. dollar after January’s PCE inflation data and strong German HICP figures supported EUR/USD. The pair rebounded from 1.0360 but failed to hold gains above 1.04.
