EUR/USD Bulls Hold 1.1410 as Traders Bet on ECB Cut and Dollar Slump

EUR/USD Holds Above 1.1400 as Dollar Slips on Tariffs and Weak Data

The EUR/USD pair continues to trade near the 1.1410–1.1420 band as dollar pressure intensifies following President Trump’s renewed tariff war. The greenback's failure to sustain above 99.00 on the Dollar Index coincides with a notable drop in ISM manufacturing PMI to 48.5, a six-month low, falling short of the expected 49.3. That miss has only deepened fears around U.S. economic fragility.

Cooling EU Inflation Clears Path for ECB to Cut Rates Again

Despite the euro’s minor retreat from the 1.1450 level reached earlier this week, its underlying tone remains constructive. Fresh eurozone inflation data showed HICP easing to 1.9% YoY in May, falling below the ECB’s 2% target for the first time in seven months. Core inflation dropped to 2.3%, well under April’s 2.7% and the forecasted 2.5%. This gives the ECB more leeway to implement further rate cuts, with markets heavily pricing in a 25bps reduction to 2.00% during this Thursday’s policy meeting.

ECB-Fed Divergence Fuels Volatility in EUR/USD

While the European Central Bank is poised to slash rates for the second time this cycle, the Fed continues to stand pat, maintaining its key rate amid still-lingering inflation and labor market tightness. Minutes from the latest FOMC meeting showed internal division, with officials torn between combating inflation and supporting growth. The resulting divergence in forward guidance leaves EUR/USD vulnerable to sharp repricing depending on which central bank blinks first.

Technical Structure Favors Bulls Above 1.1400

Technically, EUR/USD remains supported above all its major moving averages. The 50-day SMA sits at 1.1220, while the 100-day and 200-day SMAs at 1.0890 and 1.0820 respectively remain distant. The RSI above 60 confirms the bullish bias, but not yet overbought. A clean break above the 1.1454 resistance may expose 1.1500–1.1572, the April highs. On the downside, support is layered at 1.1400, 1.1389, and 1.1330.

Capital Flows and CFTC Positioning Support Euro Strength

According to CFTC data, euro net longs have climbed to 79.5K contracts, while open interest surged to 760.5K contracts, a high unseen since December 2023. This indicates rising institutional conviction in euro strength, especially with speculative traders anticipating ECB easing and potential dollar erosion.

Trump’s Tariff Campaign Fuels USD Weakness, Lifts EUR/USD

Trump's shock move to double tariffs on steel and aluminum to 50%, alongside open threats to expand EU-targeted tariffs, has unnerved dollar markets. Coupled with signs of economic deterioration — including weaker factory orders and JOLTS data — the tariff escalation has stoked fears of retaliatory trade restrictions. In turn, this has weighed on the dollar and encouraged safe-haven inflows into the euro.

Upcoming Data Could Drive EUR/USD Breakout or Breakdown

Traders now await Friday’s Nonfarm Payrolls (NFP), a key inflection point for the pair. A soft print could further pressure the dollar and lift EUR/USD toward the 1.1500–1.1573 band. Alternatively, strong job growth may offer the greenback temporary relief. On the European side, key macro data includes June 3's Inflation and Unemployment Rate, June 4's Services PMI, and June 6's Retail Sales and GDP figures. If these surprise to the upside, euro bulls may have ammunition for a fresh leg higher.

Market Verdict on EUR/USD: Buy the Dips, But Watch the Fed

EUR/USD remains technically bullish while above 1.1400, with the ECB set to cut and inflation easing. The euro is benefiting from reduced rate differentials and declining U.S. macro confidence. With markets leaning toward an additional ECB cut to 1.50% by year-end, any hawkish pause or less dovish messaging could briefly cap euro gains. However, as long as the Fed stays on hold and tariff tensions linger, the path of least resistance remains upward.

Verdict: Buy EUR/USD on dips toward 1.1370 with upside targets at 1.1500 and 1.1572. Hold if above 1.1400. Sell only on clean breakdown below 1.1270.

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