EUR/USD Surges to 1.1370: Will Dollar Chaos Ignite a Breakout Above 1.1445?

EUR/USD defies dollar slide as trade chaos and debt jitters build momentum toward 1.1445

The EUR/USD pair has clawed back ground, rising sharply to 1.1370, up 0.25%, as volatility across U.S. trade policy and deteriorating fiscal credibility triggered widespread liquidation of the U.S. Dollar. Former President Trump’s shocking pledge to double tariffs on steel and aluminum from 25% to 50% ignited a sudden storm of risk aversion, especially after he accused China of breaking a key minerals agreement. Investors rushed to price in retaliatory escalation, prompting a broad "sell America" trade that slammed the Dollar Index (DXY) to 98.85, its weakest in weeks.

This euro recovery is not simply a reaction to the weakening dollar. Structural support for EUR/USD is clearly visible on the daily chart. The pair remains firmly above the 100-day EMA, with the 14-day RSI at 57.25, underscoring a bullish tilt. Key resistance now stands at 1.1445, just above the Bollinger Band ceiling, while a breakout targets 1.1574, the high from April 21, and potentially the 1.1600 psychological level if the rally extends.

Market repricing bets on ECB rate cut as Euro braces for CPI data and Lagarde’s guidance

While the euro rallies, traders are not ignoring the macro calendar. The Eurozone CPI release is expected Tuesday, and early data from member nations hints at continued disinflation. The European Central Bank (ECB) is widely expected to cut interest rates for the eighth consecutive time on Thursday, adding pressure to the upside trajectory of EUR/USD only if ECB President Christine Lagarde downplays the rate path beyond June.

Markets are betting that with inflation finally easing back toward the ECB’s 2% target, Lagarde may attempt to sound neutral—yet with growth data stagnant and consumption trends weakening, any dovish tilt could weaken the euro’s grip above 1.1400. However, positioning data shows that euro net longs rose by 11% week-over-week, suggesting markets are increasingly willing to look beyond short-term easing in search of macro stabilization.

U.S. fiscal credibility collapses as Moody’s downgrade and legal tariff limbo intensify pressure on the dollar

The greenback has taken a direct hit from the unfolding collapse in U.S. trade credibility. Not only did Trump revive fears of a global trade war, but the situation was exacerbated by judicial uncertainty. A federal court ruling initially struck down the steel tariffs, claiming they exceeded presidential authority—but a Court of Appeals reinstated them temporarily, deepening institutional confusion and investor anxiety.

This legal ambiguity added fuel to an already explosive backdrop. Moody’s recent downgrade of the U.S. sovereign credit rating, citing the exploding deficit from Trump’s tax plans, is accelerating a flight from U.S. assets. With the dollar on the back foot and the core PCE easing to 2.5% YoY, traders are beginning to price in a softer Fed—even if Powell remains publicly hesitant. The result: institutional outflows from treasuries into foreign currencies, gold, and even cryptocurrencies.

EUR/USD technical breakout confirmed, but key upside test looms at 1.1435

Technically, EUR/USD has broken through key descending trendlines, as buyers stepped in hard above 1.1384, pushing prices toward the resistance zone at 1.1415–1.1435, which has rejected the pair repeatedly in past attempts. A clear breakout above 1.1445 opens the door toward 1.1545, followed by 1.1600 if macro conditions continue to deteriorate for the dollar.

The 1-hour chart shows a textbook bullish formation with the 50-EMA at 1.1349 and the 200-EMA at 1.1323, both sloping upward. A failure to break above 1.1445 would invite a retest of 1.1384, then 1.1354, with deeper support near 1.1283 and critical downside risk at 1.1220. Should this latter level break, bearish control could drag the pair toward 1.1110, the lower Bollinger Band boundary.

Fed official Waller’s dovish shift stokes risk appetite—but China’s retaliation threat keeps markets on edge

Federal Reserve Governor Christopher Waller’s comments this week added to EUR strength. Waller noted that despite recent inflation upticks tied to tariffs, the overall inflation trajectory is "manageable," and interest rate cuts could be on the table by September. This is a marked tonal shift from earlier Fed rhetoric and has put a cap on Treasury yields, which in turn deflated the dollar.

On the geopolitical front, Beijing’s reaction to U.S. accusations was swift and severe. Chinese authorities declared Trump’s accusations "groundless" and warned of “forceful countermeasures”, injecting new volatility into global currency markets. Treasury Secretary Scott Bessent’s reassurances that Trump and Xi will talk soon did little to ease nerves. Traders are increasingly skeptical that diplomacy will prevail before tariffs do real economic damage.

Currency heatmap confirms EUR strength as euro dominates across G10 FX board

Monday’s FX heatmap confirms the structural reallocation into the euro. The EUR is up 0.69% vs USD, 0.08% vs GBP, 0.25% vs CAD, and even showing strength against commodity-linked peers like the AUD (-0.03%) and NZD (-0.29%). With the U.S. dollar broadly offered and the euro well bid, institutions are using every dip to add exposure, betting that upcoming ECB dovishness is already priced in.

Interestingly, even risk-sensitive flows favor the euro—contrary to its traditional safe-haven limitations—suggesting that traders see structural cracks forming in U.S. macro leadership. Unless the U.S. can restore fiscal credibility or de-escalate tariff conflicts, this rotation may persist.

Short-term euro resistance faces test near 1.1445 but structural tailwinds remain intact

As the EUR/USD pair approaches the critical resistance cluster at 1.1445–1.1574, traders will be watching for a clean break or a failure rejection. A push through 1.1445 on solid volume could extend gains toward the April 21 high at 1.1574, and potentially 1.1600, especially if U.S. data weakens or China responds with tariffs of its own. However, if ECB easing guidance Thursday surprises markets with a more aggressive stance, the euro may struggle to extend beyond current levels.

With both macro and technical tailwinds aligning, the EUR/USD outlook tilts bullish into the week, barring a major reversal in U.S. trade policy or surprise strength in ISM data. The inflation trajectory, trade conflict evolution, and Lagarde’s tone Thursday will be decisive.

Verdict: BUY

At 1.1370, EUR/USD remains a buy. The pair benefits from technical breakout structure, U.S. dollar weakness tied to macro instability, and a euro supported by risk-adjusted inflows. As long as 1.1283 holds, the medium-term risk favors upside toward 1.1445, 1.1574, and possibly 1.1600. The trade war, credit downgrade, and Fed repricing all favor euro strength. Only a hawkish ECB or peace breakthrough with China would undermine this structure. For now, EUR/USD is a strong tactical long.

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