The EUR/USD pair has entered a powerful uptrend as of June 2025, driven by a compelling alignment of fundamental strength, institutional sentiment, and a textbook technical breakout. With the US economy showing signs of contraction and the Eurozone benefitting from a current account surplus and inflation resilience, the euro is poised for further upside against the dollar.

Fundamental Analysis

Recent data highlights a pronounced divergence in growth trajectories between the United States and the Eurozone. US GDP shrank by -0.2% in Q1 2025, while the Eurozone managed a modest but positive expansion of 0.3%. This signals a potential economic slowdown in the US, which is particularly concerning given the Federal Reserve’s already elevated interest rates of 4.5%. The movements in EUR/USD reflect this fundamental shift.

In contrast, the ECB has room to manoeuvre with rates at 2.4%, but it may not rush into further cuts. Inflation in the Eurozone remains stable at 2.2% YoY with a sticky 0.6% MoM reading, suggesting the ECB will take a cautious stance. Meanwhile, the US is experiencing disinflation, with MoM inflation softening to 0.2%, increasing the likelihood of a Fed pivot toward rate cuts in the second half of 2025.

The Eurozone’s external position further supports euro strength. The bloc registered a €60.1 billion current account surplus and a €36.9 billion trade surplus, compared to the US’s deep twin deficits: a -304 billion current account and -140 billion trade deficit. Moreover, Eurozone government debt-to-GDP stands at 87.4%, significantly lower than the US’s 124%, offering fiscal credibility that supports foreign investment inflows and favours EUR/USD positioning.

Sentiment Analysis

The latest Commitments of Traders (COT) report shows that institutional traders have added to their net long euro positions, while scaling back on US dollar exposure. This suggests growing market confidence in a bullish euro narrative versus USD.

The ECB’s cautiously neutral tone contrasts sharply with the Federal Reserve’s increasingly dovish rhetoric. Several FOMC members have acknowledged that the combination of slowing GDP and easing inflation may warrant rate cuts soon. In options markets, EUR/USD call skew has widened, indicating growing expectations of continued upside in the pair.

With macro conditions deteriorating in the US and the Eurozone remaining relatively stable, risk sentiment is tilting in favour of EUR/USD appreciation.

Technical Analysis

From a technical standpoint, EUR/USD has completed a decisive bullish breakout above the 1.14 handle. The pair is trading at 1.1421, just below resistance at 1.1436, with a strong underlying bullish structure. This technical perspective supports the ongoing favourable outlook for EUR/USD.

• Ichimoku Cloud: Price is clearly above the Kumo, the Conversion Line (Tenkan-Sen) at 1.1324 is above the Base Line (Kijun-Sen) at 1.1251, and the Chikou Span is well above the price and cloud. The future Kumo is bullish, with Leading Span A above Span B, signalling sustained upward pressure.
• RSI: Momentum is strengthening, with the RSI at 59.92, trending upward but not overbought — indicating further room for upside in EUR/USD.
• MACD: A fresh bullish crossover is forming above the zero line with green histogram bars re-emerging, confirming positive momentum.
• Volume: A noticeable surge in bullish volume supports the breakout, adding conviction to the move.

The technical breakout aligns perfectly with the macro and sentiment picture, making the current setup not just a retracement but potentially a trend reversal continuation toward multi-year highs for EUR/USD.

Conclusion

The EUR/USD trade idea offers the strongest conviction among all major pairs as of June 2025. With the US economy slipping into contraction, disinflation eroding Fed hawkishness, and the Eurozone demonstrating resilience through surpluses and stable inflation, the euro has a clear path higher. Institutional sentiment confirms this view, and technicals validate the move with a breakout-backed rally against the USD.

Traders may monitor for sustained closes above 1.1436 to open the door toward 1.1510 and beyond. While pullbacks are possible, the broader trend remains clearly in favour of euro bulls.

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