EUR/USD has surged higher in April, rallying more than 6% in just three weeks. But this isn’t your typical dollar weakness story — we’re now seeing signs of a deeper capital rotation into Europe, driven by political risk in the US and a breakdown in long-standing market correlations.
From Dollar Dominance to European Stability
After causing havoc with his sweeping tariff policies, Trump has now turned his attention to Fed Chair Jay Powell, reigniting concerns over central bank independence. Reports that his advisors have explored legal avenues to oust Powell mid-term have rattled global investors and undermined the dollar’s safe-haven status. For markets, it’s less about whether Powell stays or goes — it’s about the sense of unpredictability surrounding US institutions at a time when policy credibility is key.
Meanwhile, investors are looking elsewhere for stability — and for now, that spotlight is turning towards the euro. The euro’s strength this month has come despite widening interest rate differentials. US two-year yields are now nearly 2 percentage points above those in Germany, yet the euro continues to rise. That suggests investors aren’t buying euro assets for the yield — they’re buying them for perceived safety.
German government bonds (Bunds) have rallied sharply alongside the euro, which breaks the typical pattern. Usually, optimism about the Eurozone strengthens the euro but weakens Bunds as risk appetite returns. The fact that both are rising together signals a broader capital shift — away from the US and towards a rules-based, stable alternative.
Breakout With Momentum, But Caution Warranted
EUR/USD has been trending higher since early January, steadily forming higher swing lows. But this month, the pace has picked up sharply. The 50-day moving average has now crossed above the 200-day — a bullish signal that typically supports continuation in trend-following models.
After a sharp surge in the first half of the month, the pair paused briefly last week, forming a neat bull flag pattern. That consolidation has now resolved to the upside, with EUR/USD pushing to fresh 12-month highs to start the week.
Momentum remains strong, but there are two subtle warning signs to keep in mind. First, volume — which spiked early this month — has started to fade, suggesting that the early wave of buying may be slowing. Second, RSI is now in overbought territory and did not confirm Monday’s new high in price, failing to push to a new high of its own. That sort of divergence isn’t necessarily bearish, but it can often signal that a brief consolidation or pullback is needed before the next leg higher.
For now, the bias remains firmly to the upside. As long as EUR/USD holds above the breakout zone from last week’s bull flag, short-term dips are likely to be viewed as buying opportunities.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
From Dollar Dominance to European Stability
After causing havoc with his sweeping tariff policies, Trump has now turned his attention to Fed Chair Jay Powell, reigniting concerns over central bank independence. Reports that his advisors have explored legal avenues to oust Powell mid-term have rattled global investors and undermined the dollar’s safe-haven status. For markets, it’s less about whether Powell stays or goes — it’s about the sense of unpredictability surrounding US institutions at a time when policy credibility is key.
Meanwhile, investors are looking elsewhere for stability — and for now, that spotlight is turning towards the euro. The euro’s strength this month has come despite widening interest rate differentials. US two-year yields are now nearly 2 percentage points above those in Germany, yet the euro continues to rise. That suggests investors aren’t buying euro assets for the yield — they’re buying them for perceived safety.
German government bonds (Bunds) have rallied sharply alongside the euro, which breaks the typical pattern. Usually, optimism about the Eurozone strengthens the euro but weakens Bunds as risk appetite returns. The fact that both are rising together signals a broader capital shift — away from the US and towards a rules-based, stable alternative.
Breakout With Momentum, But Caution Warranted
EUR/USD has been trending higher since early January, steadily forming higher swing lows. But this month, the pace has picked up sharply. The 50-day moving average has now crossed above the 200-day — a bullish signal that typically supports continuation in trend-following models.
After a sharp surge in the first half of the month, the pair paused briefly last week, forming a neat bull flag pattern. That consolidation has now resolved to the upside, with EUR/USD pushing to fresh 12-month highs to start the week.
Momentum remains strong, but there are two subtle warning signs to keep in mind. First, volume — which spiked early this month — has started to fade, suggesting that the early wave of buying may be slowing. Second, RSI is now in overbought territory and did not confirm Monday’s new high in price, failing to push to a new high of its own. That sort of divergence isn’t necessarily bearish, but it can often signal that a brief consolidation or pullback is needed before the next leg higher.
For now, the bias remains firmly to the upside. As long as EUR/USD holds above the breakout zone from last week’s bull flag, short-term dips are likely to be viewed as buying opportunities.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Trade active
Trade closed manually
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.