The EUR/USD pair experienced a significant rally on Monday, breaking above the 1.1500 threshold for the first time since November 2021. This surge, exceeding 1% in Asian trading, was largely fueled by persistent and broad-based selling pressure on the US Dollar (USD). Thin trading conditions due to Easter Monday likely amplified the price action. The euro reached a high of 1.1528, with stops reportedly being triggered above the 1.15 level.
Growing unease surrounding a potential US economic recession and ongoing questions about the Federal Reserve’s (Fed) independence continue to weigh heavily on the USD. Furthermore, the lack of progress in trade negotiations between the US and the European Union (EU) is also acting as a persistent headwind for the Greenback, providing underlying support for the EUR/USD pair.
The escalating US-Sino trade tensions, marked by China’s recent retaliatory measures targeting Boeing and the US investigation into mineral imports from China, remain a significant drag on the US Dollar. This ongoing trade friction has allowed the EUR/USD to achieve notable milestones.
Market sentiment currently reflects a lack of confidence in the US economic outlook. The US dollar, having been central to a global financial system built over eight decades, is facing considerable pressure. While the current economic plan may yield results in the future, the previous system had established American capital markets as a global benchmark.
Beyond the substantial rally in EUR/USD, the US dollar is experiencing widespread weakness across various currency pairs. Notably, USD/CHF has broken below an eight-day consolidation, reaching a fresh 10-year low.
Looking ahead for EUR/USD, while overbought conditions on the daily chart might induce caution among buyers, the pair will likely remain sensitive to further developments regarding US economic data and Fed policy signals. The upcoming Eurozone preliminary business PMI data will also be closely watched in the following week for indications of the Eurozone’s economic health.