The EUR/USD pair is holding near the 1.1800 level, remaining close to its local highs of 2026. The main factor supporting the euro is expectations of a more dovish Federal Reserve policy amid a slowdown in the US economy, while the ECB maintains a relatively hawkish stance due to persistent inflation in the eurozone.
The market is gradually pricing in a narrowing interest rate differential between the US and Europe, which is putting pressure on the dollar.
Focus on US inflation and Fed policy
The key event of the week is US inflation data (CPI). Investors are assessing how price growth and labor market conditions will influence the Fed’s next steps. After strong employment data, the likelihood of a rapid rate cut has decreased, but the market still expects a more accommodative stance from the US regulator in the second half of the year. Additional uncertainty comes from geopolitical risks and the situation in the Middle East, which affects energy markets and inflation expectations.
ECB supports the euro with a hawkish tone
The European Central Bank continues to maintain a cautiously hawkish approach. ECB officials emphasize their readiness to respond to inflation risks, especially amid rising energy prices. This limits the downside potential for the euro even in the presence of weak macroeconomic data from the eurozone. Analysts from several banks note that the market has largely stopped pricing in aggressive ECB rate cuts, while expectations for Fed easing remain elevated.
Technical outlook: key zone at 1.1800
From a technical perspective, EUR/USD maintains an upward structure; however, the 1.1800 area remains strong resistance. A confirmed break above this level could open the way toward 1.1900–1.2000 in the medium term. Immediate support lies in the 1.1680–1.1660 range; a break below this zone could trigger a deeper correction.
Overall, the medium-term outlook remains moderately positive for the euro as long as the dollar stays under pressure from expectations of Fed rate cuts. However, the inability of bulls to break above 1.1800 increases the risk of a larger correction. In the short term, as previously noted in the article EUR/USD holds near 1.1800 as NFP fails to support dollar, the pair may continue to trade within a range.
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