The EUR/USD rate has decreased from the January range of approximately 1.2093–1.2095 to about 1.1780, representing a decline of slightly more than 2.8% within a few weeks. The price consistently approaches 1.1800, with upward movements toward 1.1850 being met with selling pressure, while downward shifts into 1.1750 are promptly met with buying interest. The magnet behavior indicates a market that has processed a Supreme Court ruling, a new 15% tariff plan, and a softer US growth report, yet still acknowledges that the overall upward trend from 2025 remains intact. The pair is undergoing a correction rather than a collapse, with the 1.18 level serving as the current point of conviction testing for both sides. The initial impact came from the legal realm. A 6–3 Supreme Court decision has effectively dismantled last year’s emergency global tariff framework, which initially appeared detrimental for the USD as it eliminated one of the most assertive trade mechanisms. That might have propelled EUR/USD beyond 1.20. The subsequent announcement altered the perspective significantly. The President has taken steps to implement new tariffs at a rate of 15%, utilizing an alternative legal approach. These tariffs are set to last for a maximum of 150 days unless Congress decides to extend them. A 15% blanket rate imposed on imports into the USD area compels companies to adjust their pricing strategies, profit margins, and investment plans in real time. The prevailing uncertainty yields dual outcomes: it bolsters the dollar as a liquid safe haven, concurrently dampening risk appetite in Europe, resulting in EUR/USD remaining stagnant rather than exhibiting a clear trend.
The macroeconomic landscape in the US presents a contradictory scenario. Fourth-quarter GDP registered at 1.4% annualized, falling short of the 3.0% consensus and down from the previous quarter’s near 4.4%. The prolonged 43-day government shutdown adversely impacted consumer activity, contributing directly to that shortfall. In a more favorable environment, a 1.4% result compared to a 3.0% forecast would typically lead to a depreciation of the USD, allowing EUR/USD to gain further momentum beyond the 1.20 level. Inflation presents a significant challenge. The latest headline PCE stands at 2.9%, an increase from the prior 2.8%, while core PCE has risen to 3.0% from 2.8%. The monthly core pace at 0.4%, rather than 0.3%, emphasizes that disinflation is not a straightforward process. Given that consumer inflation stood at 2.4% in January while the core measure reached 3.0%, the Federal Reserve is unable to endorse a rapid easing trajectory. The USD remains robust, supported by factors beyond a mere 1.4% GDP print, which hinders EUR/USD from moving decisively away from the 1.18 level. The rate markets are exhibiting a movement towards a more constrained profile for the USD. Pricing has shifted from an expectation of three 25-basis-point cuts in 2026 to a consensus around only two, with one anticipated in June and another in October.
The dollar index exhibited a weekly bullish candle, partially reversing the weakness that enabled EUR/USD to attain the 1.20 level earlier this year. Each reduction that vanishes from the curve increases the opportunity cost of holding a short position in dollars while being long on EUR/USD. Given that core PCE stands at 3.0%, GDP is at 1.4%, and tariffs are currently at 15%, the threshold for implementing aggressive easing measures remains elevated. Future comments from Waller, Cook, Bostic, and Collins will play a crucial role in either reinforcing or diminishing that outlook. Provided that the markets anticipate only two cuts, upward movements in EUR/USD towards the range of 1.1856–1.1918 are expected to encounter resistance. The narrative surrounding the EUR is primarily influenced by its structural components. Between late 2025 and January 2026, the EUR/USD pair experienced an upward trend lasting approximately three months, peaking slightly above 1.20 before reversing direction. The recent decline exceeding 2.8% has brought the price back into a robust support area centered around 1.1746–1.1775. The range encompasses the annual open, the high-week close for 2025, the high close for 2025, and the low of the February opening range. Subsequently, the next significant level is located between 1.1672 and 1.1633, while the medium-term invalidation point for the bullish structure is at 1.1598. A weekly close below 1.1598 would indicate that the upward movement anticipated for 2025 has probably concluded, suggesting that EUR/USD is entering a more significant corrective phase towards the 52-week moving average around 1.1518 and the 1.1497 area. Currently, that scenario has not materialized, indicating that the euro remains under pressure; however, the potential for a longer-term recovery is still technically intact.
The range is distinctly defined on the shorter horizon. Support levels at 1.1774 and 1.1760 have already attracted buyers as EUR/USD retreated from 1.18. Resistance levels are observed at 1.1805, 1.1828, 1.1856, and 1.1887. Every effort to break through that barrier has been diminished thus far. The outcome presents a tight range between approximately 1.1750 and 1.1850, exhibiting a subtle downward inclination: offers are appearing slightly earlier above 1.18, while bids continue to hold strong above 1.1750. The weekly levels on the higher timeframe exhibit a similar level of precision. Resistance at 1.1917–1.1918 indicates a previous swing high and a calculated extension of the 2022 movement, whereas 1.2020 corresponds with the 38.2% retracement of the 2008 decline and serves as a significant structural barrier. For EUR/USD to signal a shift in momentum, it must first close above 1.1918 and subsequently 1.2020. Until these levels are breached, any upward movement should be viewed as part of a corrective phase rather than an indication that a move toward 1.2218–1.2350 is beginning.