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Euro Technical Forecast: Will the EUR/USD Dip be Short-Lived?

Article By: ,  Head of Market Research
Thursday 6:34 PM

EUR/USD Key Points

  • As concerns over US trade policy and deficit spending have grown, forex traders consistently sold the US dollar across the board
  • This morning’s better-than-expected Flash PMI figures out of the US (52.3 on both manufacturing and services PMI) prompted US dollar bears to book short-term profits.
  • EUR/USD bulls maintain the upper hand as long as the pair can hold above the key 1.1265 level.

No market moves in one direction forever, though US dollar traders might be excused for thinking that through the first 3 days of the week.

As concerns over US trade policy and deficit spending have grown, forex traders consistently sold the world’s reserve currency across the board. This morning’s better-than-expected Flash PMI figures out of the US (52.3 on both manufacturing and services PMI) provided the dollop of good news that prompted US dollar bears to book profits after the big drop to start the week.

The key moving forward will be whether greenback bulls will actually step in and pick up the baton – I’m personally skeptical as long as US policy uncertainty and the prospects of ever-growing deficits loom, but as experienced traders know, the only constant in the market is change. Below, we highlight a critical “line in the sand” for EUR/USD traders to monitor this week.

Euro Technical Analysis: EUR/USD Daily Chart

Source: TradingView, StoneX

From a technical perspective, EUR/USD broke out of a month-long “bullish flag” pattern earlier this week, signalling a potential resumption of the 2025 rally after the late-April to mid-May pullback. As of writing, the world’s most widely-traded currency pair has dropped back to previous-resistance-turned-support at 1.1265, and that will be the most important resistance level for forex traders to monitor for the rest of the week.

EUR/USD bulls maintain the upper hand as long as the pair can hold above that key level. If it gives way, a retest of the 50-day EMA near 1.1130 could be in play, but as it stands, the path of least resistance remains to the topside for a move back up to the May highs around 1.1380.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

 

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