The euro generally remains supported by expectations of a more hawkish ECB: against the backdrop of rising energy prices and intensifying inflationary pressures in Europe, the market is increasingly pricing in a potential rate hike as early as June. This provides fundamental support for EUR/USD, even though the eurozone economy remains vulnerable to external shocks and geopolitical volatility.
On the U.S. side, the Federal Reserve maintains its pause, but the market continues to push back expectations for interest rate cuts, keeping the dollar in a zone of relative strength. Meanwhile, the recent rebound in the DXY appears more like a correction driven by risk-off sentiment and a revaluation of expectations rather than a full-fledged trend reversal.
As a result, EUR/USD remains in a tug-of-war: the euro is buoyed by expectations of ECB tightening, while the dollar is bolstered by safe-haven demand and higher yields in the U.S.. At this stage, it looks more like a wide trading range with high sensitivity to news rather than a sustained, one-sided trend.
The market's primary focus is now on upcoming signals from the ECB and the Fed: if the ECB confirms its readiness for a June hike, the euro will likely receive a fresh impulse; however, if the geopolitical risk premium intensifies, the dollar could regain the initiative.
For now, the bulls' failure to break through resistance near the 1.1785 level has triggered profit-taking on long positions, driving the pair down to the 1.1680 support level, with a potential continuation toward 1.1660–1.1650. While there is no objective cause for a massive euro sell-off, a loss of the latter level would likely trigger a decline toward 1.1620–1.1600, where buyers might re-emerge.
As noted in EUR/USD remains in wide range as downside risks remain, the pair is expected to trade within a broad range in the near term.
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