The EURO has demonstrated sustained strength against the US dollar in recent sessions, approaching its highest levels for the year near 1.1640. The upward trend coincided with a modest retreat in the dollar, influenced by mixed signals from bond yields and a cautious stance from the Federal Reserve. Federal Reserve Chair Jerome Powell’s latest congressional testimony maintained a tone of prudence, emphasizing a wait-and-see approach amid economic uncertainties.
Market sentiment was also buoyed by easing tensions in the Middle East, following a ceasefire brokered by the United States. Although fragile, this development alleviated risk concerns somewhat, prompting a shift in investor appetite toward riskier assets and underpinning demand for the EURO . The optimism surrounding geopolitical developments has helped to sustain recent gains in the currency pair, which has now recorded five consecutive days of appreciation.
Trade negotiations remained in focus, with investors monitoring the upcoming deadline of July 8 for a possible pause in US tariffs. Meanwhile, European efforts centered on strengthening trade agreements, particularly negotiations with London, as the European Union continues to pursue economic integration.
On the monetary policy front, the Federal Reserve held interest rates steady at 4.25–4.50% during its June meeting but adjusted its forecasts to reflect rising inflation and tariff-related pressures. The outlook remains divided among policymakers, with some expecting potential rate cuts by the end of the year, while others foresee stability or even higher rates into 2025. Notably, Chair Powell indicated that rising tariffs could contribute to inflationary pressures, influencing future rate decisions. During testimonies, Powell emphasized that the Fed is in no rush to lower borrowing costs, despite political calls for rate cuts.
In contrast, the European Central Bank recently reduced its Deposit Facility rate to 2.00%, with President Christine Lagarde cautioning that additional easing measures depend on external economic developments. Resistance levels for EUR/USD lie at the April and October 2021 highs near 1.1692, with short-term support around the 55-day simple moving average at approximately 1.1370. Technical indicators currently favor an upward trajectory, signaling potential for the pair to extend its rally toward the 2025 peak.
