EUR/USD fails to retake 1.06 as USD pressure continues

EUR/USD attempted to retake the 1.06 mark on Monday but was rejected instantly, leading to renewed downside pressure. The continued upside in the dollar has caused the pair to drop to a one-year low but EUR buyers have been trying to reverse the course over the past few sessions.

EUR/USD daily chart

Past performance is not a reliable indicator of future results.

The prospects of higher inflation in the US as a result of Trump’s proposed tax and tariff plans has caused markets to reprice a higher terminal rate from the Federal Reserve, which has been driving the rate differential in favour of the dollar. On the flipside, the European Central Bank (ECB) seems to be more on track with its cutting cycle, with 136 bps of cuts priced in for the next year, versus just 80 bps for the Fed. This widening in differentials will continue to apply downside pressure on EUR/USD. If the gap were to tighten, either because the narrative changes for the ECB (less rate cuts) or for the Fed (more rate cuts) then we could see some bullish reversal for the pair. 

Source: refintiv

As markets look ahead at what’s to come with regards to data and central bank policies, we could see a period of consolidation in EUR/USD. The pair could remain between 1.06 and 1.05 over the coming weeks as sellers shy away from oversold conditions and wait for a new catalyst, whilst buyers regain the strength to attempt another bullish reversal.





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