EUR/USD Falls for Second Straight Day as Fed Outlook Supports Greenback

Traders' Opinions

Summary:

EUR/USD falls below 1.1700 as weak Eurozone GDP and industrial production data reinforce concerns about slowing growth, while strong US inflation and rising Treasury yields continue to support the Dollar.

SELL EURUSD

Close Time

CLOSED

1.17100

Entry Price

1.16500

1.17950

1.15310 +0.00095 +0.08%

36.6

Pips

Profit

1.16500

1.16734

Exit Price

1.17100

Entry Price

1.17950

The Euro remained under pressure against the US Dollar on Wednesday, with EUR/USD extending losses for a second consecutive session and slipping below the 1.1700 threshold after failing to sustain gains near 1.1790 earlier in the week. Weak Eurozone economic data combined with persistent US Dollar strength continued to weigh heavily on the common currency as investors reassessed the diverging outlook between the European Central Bank and the Federal Reserve.

Fresh economic figures from the Eurozone reinforced concerns that the region’s recovery remains fragile. The second estimate of first-quarter Gross Domestic Product confirmed that the bloc expanded by just 0.1% during the January-to-March period, slowing sharply from the previous quarter’s 0.2% pace. On an annual basis, economic growth cooled to 0.8% from 1.2%, highlighting the increasing strain from high borrowing costs, weak industrial demand, and slowing global trade conditions.

Industrial Production data added further downside pressure on the Euro. Factory output rose only 0.2% in March, missing expectations for a 0.3% increase, while February’s figure was revised lower. More concerning for investors was the continued deterioration in annual production figures, with industrial activity contracting by 2.1% year-over-year, significantly worse than the previous month’s 0.8% decline.

In my view, the latest batch of economic data reinforces the growing narrative that the Eurozone economy is struggling to generate meaningful momentum at a time when external risks remain elevated. The weakness in manufacturing activity continues to expose structural vulnerabilities within the bloc, particularly as higher energy prices and geopolitical tensions pressure business sentiment and investment flows.

Meanwhile, the US Dollar continues to benefit from resilient inflation and rising Treasury yields following Tuesday’s stronger-than-expected Consumer Price Index report. US inflation accelerated to its highest annual pace in nearly three years, effectively crushing expectations that the Federal Reserve could begin cutting interest rates anytime soon.

The inflation surprise triggered another move higher in US bond yields, strengthening the Dollar broadly across currency markets as traders increasingly position for a prolonged period of restrictive US monetary policy. The widening policy divergence between the Fed and the European Central Bank has become a major headwind for EUR/USD in recent sessions.

Beyond monetary policy, geopolitical uncertainty also remains supportive for the Greenback. The ongoing stalemate surrounding the Middle East conflict continues to underpin safe-haven demand for the US Dollar, especially as diplomatic efforts between Washington, Tehran, and regional allies remain fragile.

Market attention is now focused on US President Donald Trump’s visit to China, where discussions with Chinese President Xi Jinping are expected to include efforts to ease tensions surrounding the Iran conflict. Investors remain cautious that any further escalation in geopolitical risks could intensify flows into defensive assets and add additional downside pressure on the Euro.

EUR/USD appears increasingly vulnerable in the near term unless incoming Eurozone data begins to stabilize or US inflation pressures ease meaningfully. For now, the combination of slowing European growth, weak industrial activity, elevated geopolitical uncertainty, and a hawkish Federal Reserve continues to favor the US Dollar.

Technical Analysis

From a technical perspective, EUR/USD has shifted into a more vulnerable short-term structure after failing repeatedly to sustain gains above the 1.1785–1.1790 resistance zone. On the 2-hour chart, the pair appears to be carving out a bearish rejection pattern near the top of its recent range, with price action now slipping back below the 1.1725 support area. The inability to maintain momentum above the upper resistance band suggests that bullish conviction is fading, particularly as the US Dollar continues to draw support from stronger inflation expectations and rising Treasury yields.

The recent rejection from 1.1790 has reinforced a lower-high formation, while price action is now threatening to confirm a broader downside continuation move toward the 1.1680 support zone. The chart also shows a developing bearish corrective structure, with sellers gradually regaining control after multiple failed breakout attempts. A decisive break below the 1.1700 psychological level would likely accelerate downside momentum and expose the May lows around 1.1680. If bearish pressure intensifies beneath that region, EUR/USD could extend losses toward the 1.1650 handle, which represents the next meaningful support area from the broader range structure.

On the upside, bulls would need to reclaim the 1.1725–1.1730 region to stabilize near-term sentiment. However, the key barrier remains the 1.1785–1.1790 resistance zone, where repeated rejections have emerged over the past several sessions. A sustained breakout above this ceiling would invalidate the immediate bearish setup and could trigger a stronger rally toward 1.1820 and potentially the 1.1850 region.

Momentum indicators continue to favor caution. The Relative Strength Index (RSI) appears to be drifting lower toward neutral territory after failing to hold overbought conditions, signaling weakening bullish momentum rather than outright capitulation. Meanwhile, the Moving Average Convergence Divergence (MACD) is likely crossing lower near the zero line, reflecting fading upside momentum and increasing risks of a deeper corrective decline in the sessions ahead.

Overall, the broader trend remains range-bound, but short-term price action suggests the balance of risks has tilted slightly in favor of the bears unless buyers can quickly reclaim lost support levels.

TRADE RECOMMENDATION

SELL EUR/USD

ENTRY PRICE: 1.1710

STOP LOSS: 1.1795

TAKE PROFIT: 1.1680 / 1.1650

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EUR/USD Falls for Second Straight Day as Fed Outlook Supports Greenback

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