EURUSD EUR/USD Fundamental Outlook and Trade Directional Bias for Next Week
Fed Policy and USD Weakness:
Fed Rate Cuts: Markets expect two rate cuts in 2025, but the Fed’s cautious stance (e.g., Powell’s emphasis on “unusually elevated uncertainty”) has limited USD declines.
DXY Outlook: The US Dollar Index (DXY) remains below 105.900, signaling bearish pressure. A break below 103.175 could accelerate USD weakness, luckly enough the dollar index found weekly support at 103.175 escaping further downswing.Euro boosting EUR/USD will be limited if it fails to break critical supply roof.
ECB Rate Hikes: The ECB has maintained rates at 3.5%, but hawkish rhetoric could support the EUR if inflation stabilizes.
Political Risks: Geopolitical tensions (e.g., Ukraine-US negotiations) may weigh on the EUR if unresolved, but optimism about de-escalation could fuel bullish momentum.
Trade Directional Bias
Bullish (EUR/USD↑) Moderate Fed dovishness, DXY weakness, and a break above 1.0989 could push EUR/USD toward 1.1300 .
Bearish (EUR/USD↓) High Failure to hold 1.0787 or a USD short squeeze (DXY rebound) may drive EUR/USD toward 1.0580 zone .
Critical Events Next Week
Impact on EUR/USD
Bullish EUR:
German Services PMI (forecast: 52.3) and Eurozone Services PMI (forecast: 51.2) are key drivers. Beating forecasts could signal economic resilience, boosting EUR.
Manufacturing PMIs remaining in contraction (sub-50) but improving (e.g., German Manufacturing PMI at 47.1) may limit EUR gains.
Bearish EUR:
Missed forecasts, especially in German/Eurozone services, would amplify recession fears, pressuring EUR.
US PMIs
Bullish USD:
Manufacturing PMI at 51.9 (near expansion) and Services PMI at 51.2 (steady growth) could support Fed’s "higher-for-longer" rates, strengthening USD.
Bearish USD:
Weak PMIs (e.g., Manufacturing < 51.9) may revive Fed rate-cut bets, weakening USD and lifting EUR/USD.
FOMC Member Bostic’s Speech
Hawkish Tone (delayed rate cuts): USD↑, EUR/USD↓.
Dovish Tone (hinting at cuts): USD↓, EUR/USD↑.
Trade Directional Bias
Scenario EUR/USD Bias Key Drivers
Strong Eurozone PMIs + Weak US PMIs Bullish EUR gains on economic resilience; USD weakens on dovish Fed bets.
Weak Eurozone PMIs + Strong US PMIs Bearish EUR pressured by growth fears; USD strengthens on hawkish Fed outlook.
Mixed Data + Neutral Bostic Neutral Consolidation near 1.0850–1.0950 until clearer catalysts emerge.
Key Risks
Geopolitical Tensions: US-EU trade war risks (Trump tariffs) could weigh on EUR.
ECB Policy: Dovish ECB rhetoric (rate cuts) may cap EUR gains.
Conclusion
Bearish Bias Likely:
Eurozone’s stagnant manufacturing and political uncertainty (e.g., German coalition struggles) may offset PMI improvements.
Fed’s cautious stance (Bostic’s speech) and resilient US data could strengthen USD.
ECB Policy Guidance: Hawkish rhetoric may strengthen the EUR.
Tariff Implementation: Markets will monitor Trump’s April 2 tariff deadline for trade war escalation risks.
Conclusion
EUR/USD faces bearish bias next week due to:
USD Short Squeeze Risks: DXY could rebound if Fed dovishness is priced in, pressuring EUR/USD.
On technical dxy rebound on 3 day buying strike is a big sign of potential bearish drop against euro.
Geopolitical Uncertainty: Unresolved Ukraine-US tensions may amplify volatility.
