Euro Technical Analysis: EUR/USD Pullback into EZ CPI, NFP

Euro, EUR/USD Talking Points:

• EUR/USD is starting May with a pullback after a really strong showing in March and April.
• As looked at in the USD yesterday, the bulk of that strength was relegated to the first 11 days of last month, with the past few weeks showing stall at a big spot on the chart for both DXY and EUR/USD.
• Tomorrow is a big day with Eurozone CPI released ahead of Non-farm Payrolls, and then next week brings the FOMC with a rate decision.  For the NFP Preview, check out this article just published by Matt Weller: NFP Preview: Why the Jobs Report May Not Show the Impact of Tariffs...Yet!

EUR/USD has impressed so far in 2025 and considering the popularity of parity calls for the pair as we came into the year, that performance is that much more impressive. The question now is one of staying power as the Euro has rallied aggressively against the US Dollar over the past two months largely on the basis of recession fears in the United States. What started as an apparent short squeeze has now morphed into a fresh multi-year high, and there’s been some calls for ‘de-dollarization’ given the brash entrance of tariffs from the United States on the rest of the world.

But there’s a lot that’s tenuous around that as we saw President Trump walk tariffs back quite a bit last month, with that April 11^th date proving as an important watermark. That’s when he delayed tariffs on everyone other than China and that’s when stocks started a stronger recovery, with Nasdaq 100 futures showing a greater than 20% rally from the lows established earlier in the month.

While that recovery has shown visibly in equities it’s been less noticeable in FX. There has been a stalling in the USD sell-off but so far, there hasn’t been much for reversal and the question now is which theme takes over as we move into March trade. Will the recovery trade filter through into the FX market, helping to rally the USD from multi-year lows? Or will the equity recovery get swatted down by sellers?

For EUR/USD, the month starts fast with tomorrow’s release of Eurozone CPI followed by the Non-farm Payrolls report. Both data points can have bearing on the pair’s price action as the ECB is expected to continue leaning into rate cuts, and that inflation data point will be key for gauging when and how much that might happen. And then in the U.S., it was recession fears in March that led to one of the strongest breakouts that the pair has ever seen and NFP is a very early data point, which explains the attention that it garners, as it will be one of the first looks that investors will get at the most recently completed month of economic activity. This contrasts with a data point like GDP, which is so laggy that it’s often priced-in before it’s confirmed, especially given the GDP estimates that markets focus on. It was the Atlanta GDP estimate in March that shocked markets as it showed a forecast for a large contraction so by the time the actual GDP data was released, expectations were already set very low.

For NFP – estimates are largely guesswork and that data will be the first glimpse of how the U.S. economy performed in the month of April.

From the weekly chart of EUR/USD, we can see a shooting star formation last week leading into a greater pullback this week, which has largely been relegated today. There’s also an RSI crossover, with the indicator moving below the 70-level although that can change based on how tomorrow pans out.

At this point, the market is moving along the lines of what I had described in the Tuesday webinar but the big driver for this week remains with tomorrow’s calendar.

EUR/USD Weekly Price Chart

EUR/USD Pullback or Reversal?

While the initial stages of a reversal setup appear to be in-place, we have to respect just how strong bulls came on in April – along with how well they held the move so far. After that breakout on April 11^th buyers didn’t allow for a breach of the 1.1275 Fibonacci level, which is a big level as this was the same price that held the highs back in 2023. It was a grinding few weeks after that has so far led into pullback today, but that 1.1275 level still has yet to face re-test, and that has to be considered as support potential until it is.

Support doesn’t mean reversal, however, so the bigger question is whether that support can lead to another influx of bullish price action with another test of the 1.1500 handle. Otherwise, a shorter-term lower-low would couple a lower-high at the 1.1400 handle, and the door would open to a deeper test of the 1.1200 level. That price is key as that’s what held the highs on multiple occasions last year and, to date, hasn’t been tested for support on the daily chart since the breakout last month. That price could be an invitation for bulls but again, the more interesting scenario here is if they don’t respond, which would then open the door to deeper tests at 1.1100 and 1.1000.

With those latter levels, there would be building backdrop for a bearish reversal, which would then open the door for lower-highs at prior points of support, such as 1.1200 of 1.1275.

EUR/USD Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist