EUR/USD Rally Persist Even as ECB Pursues Less Restrictive Policy

Euro Outlook: EUR/USD

EUR/USD stages a four-day rally even as the European Central Bank (ECB) delivers a 25bp rate-cut, with the recent rise in the exchange rate pushing the Relative Strength Index (RSI) into overbought territory for the first time since August.

EUR/USD Rally Persist Even as ECB Pursues Less Restrictive Policy

EUR/USD climbs to a fresh yearly high (1.0845) as it continues to carve a series of higher highs and lows, and the move above 70 in the RSI is likely to be accompanied by a further advance in the exchange rate like the price action from last year.

In turn, EUR/USD may further retrace the decline from the November high (1.0937) despite the ongoing shift in ECB policy, and it seems as though the Governing Council has yet to reach a neutral stance as President Christine Lagarde acknowledges that ‘our monetary policy is becoming meaningfully less restrictive.’

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

As a result, the Euro may face headwinds ahead of the next ECB meeting on April 17 as the ECB keeps the door open to implement lower interest rates, but the Governing Council may adjust the path for monetary policy as European lawmakers plan to boost fiscal spending.

With that said, the rally in EUR/USD may persist as it carves a series of higher highs and lows, but the RSI may show the bullish momentum abating if it struggles to hold above 70.

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

EUR/USD breaks out of the January range as it extends the rally from the start of the week, with a break/close above the 1.0830 (23.6% Fibonacci extension) to 1.0880 (23.6% Fibonacci extension) region raising the scope for a move towards the November high (1.0937).
Need a break/close above 1.0940 (50% Fibonacci retracement) to open up the 1.1070 (23.6% Fibonacci retracement) to 1.1090 (38.2% Fibonacci extension) zone, but EUR/USD may snap the recent series of higher highs and lows should it struggle to hold above 1.0760 (38.2% Fibonacci extension).
Need a move below the 1.0660 (61.8% Fibonacci extension) to 1.0710 (50% Fibonacci extension) zone to bring the 1.0580 (78.6% Fibonacci extension) to 1.0610 (38.2% Fibonacci retracement) region on the radar, with next area of interest coming in around 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension).

Additional Market Outlooks

AUD/USD Rebounds Even as Trump Tariffs Go into Effect for China

GBP/USD Eyes December High as Ascending Channel Remains Intact

Canadian Dollar Forecast: USD/CAD Rally Persists with Trump Tariffs on Track

US Dollar Forecast: USD/JPY Rebound Retrained by Slowdown in US PCE

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.

GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.