EUR/USD Price Surge Eyes 1.20 as Market Ignores Powell Risk and Tariff Threats
Momentum Shifts Favor Bulls Despite ECB Uncertainty
The EUR/USD pair is riding an aggressive bullish momentum wave, stabilizing just beneath the 1.1750 handle after three days of uninterrupted gains that reclaimed nearly 190 pips off last week’s low of 1.1555. A fresh high at 1.1760 places the pair at a critical inflection point: 1.1748 marks the 78.6% Fibonacci retracement of the 2021–2022 downtrend, and bulls are threatening to break through resistance clusters not seen since July 1. The bullish trend is well intact with higher lows forming above 1.1645, which served as dynamic trendline support — a level buyers fiercely defended.
Technical structure is reinforced by the 50-period EMA at 1.1685 and 100-period EMA at 1.1675, both now acting as support beneath current price. With price action pushing into the upper end of its ascending channel, the next upside targets emerge at 1.1788, 1.1810, and 1.1830, beyond which the door swings open to 1.1954 (61.8% extension) and the psychological ceiling at 1.2000. The bulls’ final checkpoint lies at 1.2202, the full Fibonacci extension.
Fibonacci and Oscillators Confirm the Technical Breakout
Momentum indicators are synchronized with the price trend. The Stochastic oscillator rebounded from deep oversold conditions, now pointing decisively upward. This transition signals that buyer pressure is outpacing seller fatigue. Meanwhile, the RSI sits in the mid-50s, trending upward, confirming space for continued gains without flashing overbought. Price holding above 1.1720, which flipped from resistance to support, is a technical validation of the current bullish structure. Further downside attempts are likely to be capped by 1.1680, then 1.1645, both now treated as base zones.
Importantly, the ascending trendline from March lows remains unbroken, intersecting price at 1.1645–1.1670. That level marks the confluence of Fibonacci, moving average support, and a prior breakout zone. Traders are targeting 1.1880 on breakout buys from 1.1640, with a tight stop at 1.1590. On the flip side, bearish positioning activates at 1.1780, targeting 1.1520 with a 1.1840 stop — but recent price behavior makes the upside scenario statistically stronger.
Trump-Powell Clash Continues to Undermine Dollar Confidence
The geopolitical backdrop remains volatile and dollar-negative. President Trump’s renewed threat to remove Fed Chair Jerome Powell, citing dissatisfaction with interest rate policy, triggered a sharp USD pullback after initially reacting bullishly to hot CPI data. That reversal allowed EUR/USD to reverse course and push higher. Despite strong U.S. economic prints — including existing home sales at 3.93M, just shy of the 4.01M consensus, and firm CPI — political interference in the Fed’s independence spooked markets.
The U.S. Dollar Index (DXY) sits at 97.41, unable to recover above key resistance at 97.56, and still beneath its 50- and 100-period EMAs at 97.92 and 97.97, respectively. A drop below 97.18 could trigger a broader dollar sell-off toward 96.61, further lifting EUR/USD.
ECB Rate Decision Looms as Key Macro Catalyst
Traders are on edge heading into Thursday’s ECB policy decision, where rates are expected to remain on hold at 2%, but forward guidance could shift. With consumer confidence in the Eurozone still negative at -15.0, barely improved from last month’s -15.3, any dovish lean from President Lagarde could dampen euro appetite. Still, the ECB faces pressure from both weak growth and a fragile political balance, particularly with trade tensions between the EU and U.S. escalating toward potential 30% tariffs by August.
Despite the overhang, euro bulls continue to price in fewer rate cuts than previously expected. Market participants are now leaning toward a September move rather than July. That hesitation, paired with persistent dollar uncertainty, gives EUR/USD a tactical advantage in the near term.
Positioning Risks: Bullish Bias Still Faces Crowding
While the technical outlook supports more upside, there is risk of overcrowding on the long side. Given that EUR/USD has rebounded nearly 190 pips in less than a week and speculative long positions have risen sharply, any disappointment from the ECB or a re-escalation of U.S. political pressure on the Fed could unwind bullish exposure. Still, as long as the pair trades above 1.1720, the bias remains structurally positive.
Traders should also monitor short-term sentiment indicators. For instance, FX heatmaps show EUR underperforming against the NZD (-0.65%), AUD (-0.44%), and CAD (-0.18%), indicating that risk appetite is broad-based, but euro-specific strength is fragile. This divergence warns that EUR/USD gains may be driven more by dollar weakness than euro strength — a nuance that matters if macro momentum shifts.
Final Verdict: EUR/USD Holds Bullish Breakout — Buy Bias Remains Valid While Above 1.1720
Backed by clean technical confirmation, a weakening U.S. dollar under Trump’s political cloud, and supportive moving average confluence, the EUR/USD rally remains in play. As long as the pair stays above 1.1720, bulls retain control, with resistance targets layered between 1.1788 and 1.1830, and further potential toward 1.2000 and 1.2202 in coming weeks.
However, traders should size risk carefully heading into the ECB decision, where any dovish tilt could short-circuit the advance.
Verdict: BUY EUR/USD — Target 1.1880–1.1954 — Stop Below 1.1645.
