EUR/USD Rally Stretches Toward 1.1830 as Dollar Slides, Fed Stalls

EUR/USD Surges Toward 1.1830 as Dollar Breaks Down, Traders Brace for Powell, Tariffs, and Budget Fallout

EUR/USD Bulls Extend 10-Day Rally as Fed Uncertainty, Tariff Chaos, and Eurozone Data Lift Euro

The euro has surged to its strongest level since 2021, with EUR/USD last trading at 1.1809, capping a 10-day rally fueled by crumbling U.S. dollar momentum, fading Fed credibility, and political risk emanating from Trump’s $3.3 trillion spending package. Bulls are now targeting the 1.1830–1.1908 resistance zone, just shy of the pandemic-era highs.

The US Dollar Index (DXY) has collapsed to 96.70, marking a 9-session losing streak and its lowest point in 28 months. Investors are now pricing in two rate cuts by the Fed before year-end, with a 20% probability for July and nearly full odds for September, according to CME FedWatch. Trump’s escalating feud with Fed Chair Jerome Powell has injected fresh political risk, with Trump publicly criticizing Powell’s reluctance to align U.S. rates with those of Japan or Denmark. Meanwhile, rising odds that the sweeping $3.3T tax-and-spend bill will stall in the Senate is pushing traders toward euro exposure as the U.S. outlook darkens.

Eurozone Inflation and Manufacturing Data Support Euro Strength Amid U.S. Debt Spiral

On the European side, the June Harmonized Index of Consumer Prices (HICP) matched expectations at 2.3% YoY, with core inflation ticking up to 2.0%, modestly above the prior 1.9% reading. Monthly HICP rose 0.3%, a firm rebound from last month’s flat reading, suggesting sticky price pressure. Meanwhile, Eurozone manufacturing PMI was revised up to 49.5, signaling continued contraction but slightly better than initial forecasts.

Germany’s jobless figures also surprised positively, while optimism from European Commission President Ursula von der Leyen hints that Brussels may resist U.S. tariffs. The EU continues negotiating carve-outs from Trump’s universal 10% base tariff, though officials warn retaliation remains an option. Until the July 9 tariff deadline, euro strength may persist as traders hedge escalating geopolitical risk and weak U.S. fundamentals.

Technical Structure: EUR/USD Faces Key Resistance at 1.1830 and 1.1908 Before Breakout Confirmed

From a structural perspective, EUR/USD remains well above both its 50-day EMA (1.1709) and 200-day EMA (1.1576), showing long-term bullish conviction. The pair has surged through 1.1768, consolidating around 1.1790–1.1810. A decisive break above 1.1830 opens upside toward the 1.1880 and 1.1910 zone, with broader targets stretching toward 1.2000+ if momentum holds. MACD signals remain positive, with the signal line still climbing, while the RSI at 75 warns of overbought conditions but hasn’t triggered reversal signals.

Support levels are seen at 1.1770, 1.1735, and deeper at 1.1695, where short-term dip-buying could intensify. The bullish channel from mid-June remains intact, and short-term trendline support aligns around 1.1747. The pair also holds above the prior resistance-turned-support zone at 1.1768, now a key level to watch into NFP and Powell’s speech in Sintra.

Trump’s Tariff Deadline, Sintra Forum, and Fed Fallout Could Trigger Explosive Volatility in EUR/USD

The next 7 days are critical for EUR/USD volatility. First, the July 9 deadline for Trump’s global tariff enforcement could escalate tensions with Japan, the EU, and India. The White House has signaled tariffs could rise from 10% to 50% unless reciprocal deals are signed, and only the UK has inked a compliant agreement. Markets are bracing for retaliation threats from the EU, and Treasury Secretary Scott Bessent confirmed penalties will kick in automatically if deadlines lapse.

Second, Fed Chair Powell’s speech at the Sintra Central Banking Forum could cement the market’s dovish bias. His recent remarks suggest rates might already be too high if tariffs weren’t in play. Markets now see the Fed boxed in between persistent inflation, Trump’s attacks, and a potential budget crisis if the $3.3T bill collapses. Traders expect Powell to walk a fine line between economic stability and political pressure, a scenario that could deepen dollar losses.

Third, macro data is poised to stir further movement. Key releases include the ISM Manufacturing PMI, US JOLTS job openings, and Eurozone CPI revisions. A weak Nonfarm Payrolls print could lock in a September cut, further weakening the dollar.

Final Verdict: EUR/USD Still Bullish, But Watch for Volatility Above 1.1830

With strong eurozone data, dovish Fed expectations, and deteriorating U.S. fiscal optics, the euro remains in firm control. As long as EUR/USD holds above 1.1768–1.1770, the setup favors bullish continuation. A clean breakout above 1.1830 may unleash upside toward 1.1908–1.2000, though overbought signals warrant caution. Key catalysts including tariffs, Fed credibility, and NFP risk will shape the path forward.

EUR/USD: Buy on Breakouts Above 1.1830, Support Holds at 1.1770

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