EUR/USD Fundamental Outlook and Trade Directional Bias for Next Week
Fed Policy and USD Weakness:
Fed Rate Cuts: Markets expect two rate cuts in 2025, but the Fed’s cautious stance (e.g., Powell’s emphasis on “unusually elevated uncertainty”) has limited USD declines.
DXY Outlook: The US Dollar Index (DXY) remains below 105.900, signaling bearish pressure. A break below 103.175 could accelerate USD weakness, luckly enough the dollar index found weekly support at 103.175 escaping further downswing.Euro boosting EUR/USD will be limited if it fails to break critical supply roof.
ECB Rate Hikes: The ECB has maintained rates at 3.5%, but hawkish rhetoric could support the EUR if inflation stabilizes.
Political Risks: Geopolitical tensions (e.g., Ukraine-US negotiations) may weigh on the EUR if unresolved, but optimism about de-escalation could fuel bullish momentum.
Trade Directional Bias
Bullish (EUR/USD↑) Moderate Fed dovishness, DXY weakness, and a break above 1.0989 could push EUR/USD toward 1.1300 .
Bearish (EUR/USD↓) High Failure to hold 1.0787 or a USD short squeeze (DXY rebound) may drive EUR/USD toward 1.0580 zone .
Critical Events Next Week
Impact on EUR/USD
Bullish EUR:
German Services PMI (forecast: 52.3) and Eurozone Services PMI (forecast: 51.2) are key drivers. Beating forecasts could signal economic resilience, boosting EUR.
Manufacturing PMIs remaining in contraction (sub-50) but improving (e.g., German Manufacturing PMI at 47.1) may limit EUR gains.
Bearish EUR:
Missed forecasts, especially in German/Eurozone services, would amplify recession fears, pressuring EUR.
US PMIs
Bullish USD:
Manufacturing PMI at 51.9 (near expansion) and Services PMI at 51.2 (steady growth) could support Fed’s "higher-for-longer" rates, strengthening USD.
Bearish USD:
Weak PMIs (e.g., Manufacturing < 51.9) may revive Fed rate-cut bets, weakening USD and lifting EUR/USD.
FOMC Member Bostic’s Speech
Hawkish Tone (delayed rate cuts): USD↑, EUR/USD↓.
Dovish Tone (hinting at cuts): USD↓, EUR/USD↑.
Trade Directional Bias
Scenario EUR/USD Bias Key Drivers
Strong Eurozone PMIs + Weak US PMIs Bullish EUR gains on economic resilience; USD weakens on dovish Fed bets.
Weak Eurozone PMIs + Strong US PMIs Bearish EUR pressured by growth fears; USD strengthens on hawkish Fed outlook.
Mixed Data + Neutral Bostic Neutral Consolidation near 1.0850–1.0950 until clearer catalysts emerge.
Key Risks
Geopolitical Tensions: US-EU trade war risks (Trump tariffs) could weigh on EUR.
ECB Policy: Dovish ECB rhetoric (rate cuts) may cap EUR gains.
Conclusion
Bearish Bias Likely:
Eurozone’s stagnant manufacturing and political uncertainty (e.g., German coalition struggles) may offset PMI improvements.
Fed’s cautious stance (Bostic’s speech) and resilient US data could strengthen USD.
ECB Policy Guidance: Hawkish rhetoric may strengthen the EUR.
Tariff Implementation: Markets will monitor Trump’s April 2 tariff deadline for trade war escalation risks.
Conclusion
EUR/USD faces bearish bias next week due to:
USD Short Squeeze Risks: DXY could rebound if Fed dovishness is priced in, pressuring EUR/USD.
On technical dxy rebound on 3 day buying strike is a big sign of potential bearish drop against euro.
Geopolitical Uncertainty: Unresolved Ukraine-US tensions may amplify volatility.
Fed Policy and USD Weakness:
Fed Rate Cuts: Markets expect two rate cuts in 2025, but the Fed’s cautious stance (e.g., Powell’s emphasis on “unusually elevated uncertainty”) has limited USD declines.
DXY Outlook: The US Dollar Index (DXY) remains below 105.900, signaling bearish pressure. A break below 103.175 could accelerate USD weakness, luckly enough the dollar index found weekly support at 103.175 escaping further downswing.Euro boosting EUR/USD will be limited if it fails to break critical supply roof.
ECB Rate Hikes: The ECB has maintained rates at 3.5%, but hawkish rhetoric could support the EUR if inflation stabilizes.
Political Risks: Geopolitical tensions (e.g., Ukraine-US negotiations) may weigh on the EUR if unresolved, but optimism about de-escalation could fuel bullish momentum.
Trade Directional Bias
Bullish (EUR/USD↑) Moderate Fed dovishness, DXY weakness, and a break above 1.0989 could push EUR/USD toward 1.1300 .
Bearish (EUR/USD↓) High Failure to hold 1.0787 or a USD short squeeze (DXY rebound) may drive EUR/USD toward 1.0580 zone .
Critical Events Next Week
Impact on EUR/USD
Bullish EUR:
German Services PMI (forecast: 52.3) and Eurozone Services PMI (forecast: 51.2) are key drivers. Beating forecasts could signal economic resilience, boosting EUR.
Manufacturing PMIs remaining in contraction (sub-50) but improving (e.g., German Manufacturing PMI at 47.1) may limit EUR gains.
Bearish EUR:
Missed forecasts, especially in German/Eurozone services, would amplify recession fears, pressuring EUR.
US PMIs
Bullish USD:
Manufacturing PMI at 51.9 (near expansion) and Services PMI at 51.2 (steady growth) could support Fed’s "higher-for-longer" rates, strengthening USD.
Bearish USD:
Weak PMIs (e.g., Manufacturing < 51.9) may revive Fed rate-cut bets, weakening USD and lifting EUR/USD.
FOMC Member Bostic’s Speech
Hawkish Tone (delayed rate cuts): USD↑, EUR/USD↓.
Dovish Tone (hinting at cuts): USD↓, EUR/USD↑.
Trade Directional Bias
Scenario EUR/USD Bias Key Drivers
Strong Eurozone PMIs + Weak US PMIs Bullish EUR gains on economic resilience; USD weakens on dovish Fed bets.
Weak Eurozone PMIs + Strong US PMIs Bearish EUR pressured by growth fears; USD strengthens on hawkish Fed outlook.
Mixed Data + Neutral Bostic Neutral Consolidation near 1.0850–1.0950 until clearer catalysts emerge.
Key Risks
Geopolitical Tensions: US-EU trade war risks (Trump tariffs) could weigh on EUR.
ECB Policy: Dovish ECB rhetoric (rate cuts) may cap EUR gains.
Conclusion
Bearish Bias Likely:
Eurozone’s stagnant manufacturing and political uncertainty (e.g., German coalition struggles) may offset PMI improvements.
Fed’s cautious stance (Bostic’s speech) and resilient US data could strengthen USD.
ECB Policy Guidance: Hawkish rhetoric may strengthen the EUR.
Tariff Implementation: Markets will monitor Trump’s April 2 tariff deadline for trade war escalation risks.
Conclusion
EUR/USD faces bearish bias next week due to:
USD Short Squeeze Risks: DXY could rebound if Fed dovishness is priced in, pressuring EUR/USD.
On technical dxy rebound on 3 day buying strike is a big sign of potential bearish drop against euro.
Geopolitical Uncertainty: Unresolved Ukraine-US tensions may amplify volatility.
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.