EUR/USD forecast at a crossroads as dollar weakens further

The euro is on a tear, and traders are loving it. After a six-day winning streak, the EUR/USD pair has surged to its highest level since 2021, turning heads across the FX world. But with fresh data on the horizon from both sides of the Atlantic, can this rally keep going, or are we nearing the top? 

Markets are bracing for answers, and the next move could be  big. 

Trump and Fed uncertainty 

Much of the recent momentum has less to do with euro strength and more to do with dollar weakness - and that’s a story packed with politics and soft data.

US President Donald Trump once again attacked Federal Reserve Chair Jerome Powell, branding him “terrible” and “very political” during a press conference in The Hague. Trump’s not-so-subtle suggestion that Powell could soon be replaced has rattled investors, who already fear that Fed independence is under siege. 

While Powell’s term officially runs through 2026, the mere hint of political interference has added a fresh layer of uncertainty to the Fed’s outlook - and weighed heavily on the greenback.

On the data front, things haven’t looked much better. The US economy contracted by 0.5% in the first quarter of 2025 - the first quarterly drop in three years and worse than the previously estimated 0.2% decline. A soft patch in consumer spending and a sharp fall in exports did most of the damage. 

Meanwhile, jobless claims dipped slightly to 236,000, but they remain stubbornly high compared to the yearly average, not exactly the confidence booster markets were hoping for. Sure, there was one bright spot - May’s Durable Goods Orders surged by over 16%, but that pop looks more like a one-off bounce than a sign of sustained strength.

Alt text: Chart showing US quarterly GDP contraction in Q1 2025, highlighting the downward revision to -0.5% and previous trends over the last three years.

Source: U.S. Census Bureau, Trading Economics

EU inflation data: Europe’s calm amid the chaos

While the US narrative has been noisy, Europe has offered a quieter, more measured tone - and in this market, that’s proving attractive.

European Central Bank Vice President Luis de Guindos made it clear this week that the ECB is sticking to a data-dependent, meeting-by-meeting approach. No bold promises, no political drama. Instead, he flagged trade tensions and geopolitical risks as the main concerns and left the door slightly ajar for further rate cuts if needed. That calm, considered stance has added to the euro’s appeal, especially when contrasted with the storm brewing across the Atlantic.

Eurozone data has been far from spectacular, but it hasn’t spooked markets either. PMI figures are hovering around the 50 mark, not too hot, not too cold, and inflation, while still on the low side, hasn’t collapsed.

Alt text: Bar chart of Eurozone composite PMI readings showing stability around 50, indicating balanced economic activity without significant expansion or contraction

Source: S&P Global, Trading Economics

Put simply, the euro isn’t booming, but it’s behaving - and right now, that’s enough.

US Inflation data takes the spotlight

So, where does that leave the EUR/USD pair? It’s right on the edge of something bigger - or a possible pullback.

All eyes now turn to the upcoming data releases, starting with Germany’s HICP flash data and followed by the Eurozone-wide numbers. 

Analysts perceive this trio of figures could tip the balance either way:

• If US inflation undershoots, it strengthens the case for rate cuts, pushing the dollar lower and possibly sending EUR/USD even higher.
  
  
• If Eurozone inflation holds steady or ticks up, the ECB may hold back on easing - another win for the euro.
  
  
• But a surprise in either direction could throw this tidy narrative off course.
  
  

Trading at the edge: Are we at EUR/USD resistance levels?

At around 1.1700, the EUR/USD pair is sitting at a level not seen since late 2021. The pair’s recent rally has been powered by a mix of macro divergence, political risk, and market positioning, but for it to continue, the fundamentals need to deliver. That means inflation needs to support the narrative, and central banks need to stay in their respective lanes.

Of course, things could just as easily snap back. A hot US inflation print or a hawkish Fed pivot could bring the dollar back to life - and take the euro down a peg. At the time of writing, the pair is holding above the 1.1700 price level with signs of a pullback evident within a buy zone. However, recent volume shows dominant bullish pressure, with little push-back from sellers, hinting at more movement north. 

Should we see a further uptick, prices could be held at the 1.1754 resistance level. Conversely, should we see a slide, prices could find support at the 1.1454, 1.1290, and 1.1094 support levels. 

Alt text: EUR/USD price chart on Deriv MT5 showing breakout past 1.1700, key resistance at 1.1754, and support zones at 1.1454, 1.1290, and 1.1094.

Source: Deriv MT5

Will EUR/USD keep pushing up? You can speculate with a Deriv X and a Deriv MT5 account.