The EUR/USD pair hovered near 1.1200 in early European trading on Thursday, supported by a softer U.S. dollar. The greenback weakenebd amid lingering doubts over the recently announced U.S.–China tariff rollback, which trimmed reciprocal tariffs from over 100% to 10% and introduced a 90-day pause in enforcement.
Markets initially welcomed the deal, which came on the heels of last week’s U.S.–UK trade agreement and optimistic rhetoric from President Trump. However, skepticism emerged due to the lack of implementation details and lingering tensions over Chinese imports such as fentanyl.
The euro capitalized on the dollar’s pullback, gaining ground as risk appetite improved slightly across FX markets. Investors remained focused on upcoming data releases—particularly Eurozone GDP and inflation figures, along with the U.S. Producer Price Index and retail sales due later in the day.
Monetary Policy Divergence Deepens
Currency traders continue to track the growing policy gap between the Federal Reserve and the European Central Bank (ECB).
- ECB: Cut rates by 25 basis points in April, pushing the deposit facility rate down to 2.25%
- Fed: Held rates steady with a hawkish tone, showing no urgency to ease monetary conditions
Markets are now pricing in another ECB cut as early as June, while expectations for Fed cuts have been pushed out to September, depending on inflation data and geopolitical developments.
Key expectations:
- ECB may deliver one more cut this year
- Fed likely to cut twice by 25 bps before year-end
This divergence is increasingly influencing positioning across major currency pairs, with investors seeing more upside in the euro should the Fed delay easing further.
Euro Speculators Stay Long Amid Volatility
Despite uneven momentum in recent weeks, speculative interest in the euro remains strong. According to CFTC data through May 6:
- Net long positions stood at 75,700 contracts
- Open interest reached 738,000 contracts, the highest since September 2024
Yet, commercial participants remain net short, indicating caution among corporates navigating macroeconomic uncertainty.
📌 Key Technical Levels to Watch:
- Resistance: 1.1572 (April high), 1.1600 (psychological), 1.1692 (Oct 2021 peak)
- Support: 1.1064 (May low), 1.1041 (55-day SMA), 1.0975 (200-day SMA)
- Indicators: RSI at 48, ADX at 37—mixed signals suggest consolidation
The euro remains bid above 1.1200, but a break above 1.1572 is needed to confirm bullish continuation. Investors will be closely watching data and central bank signals for further direction.
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