VT 
The euro continues to struggle against the U.S. dollar, with EUR/USD trading near 1.1550 after breaking below a key support zone. The pair is now exposed to further downside as macro fundamentals increasingly favor the dollar.
Dollar Strength and Eurozone Fragility
The U.S. dollar remains firm, supported by rising Treasury yields and resilient economic data. The 10-year yield has climbed back above 4.50%, driven by strong labor market indicators and persistent inflation. While markets still expect a Fed rate cut later this quarter, recent comments from Chair Powell suggest a cautious approach, reinforcing the dollar’s appeal.
In contrast, the eurozone is grappling with a slowdown. Manufacturing activity continues to contract, and Germany reported a 1.3% drop in industrial production last month. Inflation is easing faster than expected, which has reduced the likelihood of further tightening from the European Central Bank. Without a clear stimulus path, the euro lacks both yield support and growth momentum.
Capital flows are also favoring the dollar, as the imbalance between the two economies and their respective monetary paths continued to grow. With the euro offering no special edge, EURUSD remains vulnerable to further declines unless eurozone data surprises to the upside or the Fed pivots more dovishly.
Technical Setup: Breakdown Below Critical Support in Play
EUR/USD is trading below the key support zone between 1.1540 to 1.1550, with technical momentum favoring the bears.
- Support: 1.1540 to 1.1550, with 1.1390 as the next structural level and 1.1250 as the deeper downside target
- Resistance: 1.1670 to 1.1727 as reversal threshold, with 1.1778 and 1.1917 as upside targets if breakout occurs
- Bearish Bias: Short below 1.1540 with momentum, targetting 1.1390 and 1.1250 with stop-loss above 1.1600.
- Bullish Setup: Long only if price breaks and closes above 1.1670 to 1.1727, targetting 1.1778 and 1.1917.
- Range Play: Trade between 1.1550 and 1.1727 with tight stops. Flip bias on breakout or breakdown.
Downside Risks Dominate for EURUSD
With eurozone fundamentals deteriorating and U.S. yields rising, EURUSD is likely to remain under pressure unless eurozone data improves or the Fed signals a more dovish pivot. A confirmed break below 1.1540 could open the door to 1.1390 and 1.1250. Traders should monitor upcoming U.S. labor and inflation data, as well as ECB commentary, for signs of a potential shift.
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