Euro came under pressure during Tuesday's Asian session after failing to establish a foothold above the 1.1600 level against the US dollar. The single currency was weighed down by a modest recovery in demand for the greenback and profit-taking activity ahead of a busy week of major central bank meetings.
Despite the broader weakness of the US dollar in recent sessions, traders have been reducing long euro positions amid heightened uncertainty.
ECB maintains cautious stance
Market sentiment toward the euro also remains influenced by the European Central Bank's latest policy meeting. While the ECB delivered a 25-basis-point rate increase, policymakers refrained from providing clear guidance on further tightening, emphasizing a data-dependent approach. At the same time, the central bank revised its inflation forecasts higher while lowering growth projections for the eurozone economy, reinforcing concerns about the region's economic outlook.
Dollar supported by macroeconomic backdrop
The US dollar continues to draw support from expectations that the Federal Reserve will maintain a relatively restrictive monetary policy stance. Recent economic data have pointed to persistent inflationary pressures in the United States, reducing expectations for rapid policy easing. As a result, the interest rate differential remains one of the key factors limiting the euro's upside potential.
Focus shifts to the Fed and EUR/USD outlook
Investor attention is now firmly focused on the Federal Reserve's policy decision and upcoming economic releases. Although EUR/USD remains close to multi-week highs, the pair's inability to secure a sustained break above 1.1600 increases the risk of a corrective pullback. Nevertheless, the broader medium-term trend remains constructive unless the dollar receives additional support from a more hawkish Fed message.
Near-term outlook
The rebound from support around 1.1580 and the recovery back above 1.1600 suggest that buyers remain in control for now. However, as long as the pair remains below 1.1620, the risk of a break lower toward 1.1550 remains elevated. A decisive move above resistance could open the door for further gains toward the 1.1640–1.1660 area, as discussed previously in Euro recovers as easing Middle East tensions boost risk appetite.
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