Introduction

EUR/USD has entered a decisive bearish phase as the euro struggles against a fundamentally stronger US dollar. Weak Eurozone growth, fragile business confidence, and moderating inflation contrast with robust US economic performance and higher interest rates. This combination has weighed heavily on the EUR/USD pair. Furthermore, the technical structure now points to the risk of a deeper decline in EUR/USD.

Fundamental Analysis

The US economy continues to demonstrate resilience with 3% QoQ GDP growth and 2% YoY expansion. It is supported by steady 2.7% annual inflation and a policy rate at 4.5%. Despite a persistent trade and current account deficit, the United States benefits from stronger growth momentum. Additionally, it has a dynamic labour market with 4.2% unemployment, and positive sentiment around its economic outperformance.

By contrast, the Eurozone remains weak. Quarterly GDP growth is just 0.1%, with 1.4% annual growth, signalling near-stagnation. Inflation has moderated to 2% YoY, and the European Central Bank’s policy rate of 2.15% leaves the euro at a relative yield disadvantage versus the US dollar. Business and consumer confidence remain fragile. Moreover, structural headwinds from energy dependence and weak external demand continue to suppress euro strength with implications for EUR/USD.

These fundamental divergences underpin a continued macro bias toward USD appreciation against EUR, impacting EUR/USD exchanges.

Sentiment Analysis

Market sentiment is firmly tilted toward dollar strength. Hedge funds and speculative accounts have gradually reduced EUR exposure. They maintain a mild net short position as the market prices in US economic exceptionalism and a more hawkish Fed stance relative to the ECB.

Safe-haven flows into USD have also been supported by periodic risk-off episodes. US Treasury yields remain more attractive than their euro-area equivalents. Meanwhile, the euro suffers from a lack of positive catalysts. As growth struggles and inflation pressures ease, this limits the ECB’s ability to tighten further, affecting EUR/USD dynamics.

Technical Analysis

• Ichimoku Cloud: Price has broken below the cloud, confirming bearish trend alignment for EUR/USD. The Conversion Line is below the Base Line, and the Lagging Span has crossed below price, reinforcing the downtrend.
• RSI: Currently at 45.15, RSI reflects bearish momentum but is not oversold, leaving scope for continuation without immediate reversal pressure.
• MACD: Histogram is marginally negative with the MACD line below the signal line, indicating emerging downside momentum.
• Volume: Trading activity shows a modest uptick during recent declines, suggesting early selling pressure is being confirmed by participation.

The next critical support zone lies near 1.1500. A break below opens the door to 1.1400, while resistance sits near 1.1600, the top of the thin cloud and recent breakdown area for EUR/USD.

Conclusion

EUR/USD faces a confluence of macro, sentiment, and technical pressures that favour continued downside. The euro’s weak growth profile, relative yield disadvantage, and fragile confidence leave it vulnerable to sustained dollar strength. With bearish technicals confirming the macro case, traders may consider selling rallies into resistance. Moreover, they should monitor US economic data and risk sentiment for potential acceleration toward the 1.1400 target zone in the EUR/USD pair.