Introduction: The euro dollar is the best-performing major Forex pair this year (2025), up over 8%. But since the beginning of May, major resistance at $1.15 and an overbought technical environment have halted the rise, while trade negotiations between the USA and China are well underway. Although the rise in the EUR/USD rate has been underpinned by structural factors since the start of the year, there is an essential fundamental missing from the prospect of breaking through major resistance at $1.15 later this year.
1) The $1.15 level is a long-term technical resistance on the euro-dollar exchange rate and should lock in prices for some time
In our previous TradingView contributions, we highlighted the major dimension of the $1.15 resistance, which has effectively triggered a retracement entry for the EUR/USD rate on Forex. The first chart below illustrates the scope of this technical resistance, which has joined all monthly highs for almost 20 years.
We consider it likely that the euro/dollar rate will hold below this resistance in the short term, with initial support in the $1.09/$1.10 zone.
2) The euro dollar's annual rebound was built on structural factors
Several factors underpinned the euro dollar's rise between January and April, some of which have a structural dimension:
- Institutional net positioning in Euro Dollar futures and options moved back into long territory in the first quarter of this year (see second chart below).
- Germany's fiscal easing and the prospect of a ceasefire in Ukraine were two pillars of the rebound.
- The trade war between the USA and over 70 countries weighed on the US dollar
Now that trade diplomacy has taken the upper hand, the US dollar has entered a technical rebound, with the result that the euro-dollar rate has entered a short-term downward retracement phase.
3) But the euro-dollar won't break through $1.15 until the Federal Reserve (FED) resumes cutting its federal funds rate.
So there are structural signals in favor of a rising euro dollar this year, driven by fiscal, macroeconomic and geopolitical fundamentals. But there is one divergence that still calls for caution: the famous divergence of monetary policies
Historically, there is a positive correlation between the euro-dollar rate and the anticipated rate differential between the Federal Reserve and the ECB. The narrower this rate differential, the more bullish the euro-dollar and vice versa.
Over the past few weeks, this expected rate differential has fallen with the Fed's intransigence regarding the risk of a rebound in US inflation due to tariffs. If the FED does not move, then it is unlikely that the EUR/USD rate will be able to break through $1.15 in the short term.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
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All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
1) The $1.15 level is a long-term technical resistance on the euro-dollar exchange rate and should lock in prices for some time
In our previous TradingView contributions, we highlighted the major dimension of the $1.15 resistance, which has effectively triggered a retracement entry for the EUR/USD rate on Forex. The first chart below illustrates the scope of this technical resistance, which has joined all monthly highs for almost 20 years.
We consider it likely that the euro/dollar rate will hold below this resistance in the short term, with initial support in the $1.09/$1.10 zone.
2) The euro dollar's annual rebound was built on structural factors
Several factors underpinned the euro dollar's rise between January and April, some of which have a structural dimension:
- Institutional net positioning in Euro Dollar futures and options moved back into long territory in the first quarter of this year (see second chart below).
- Germany's fiscal easing and the prospect of a ceasefire in Ukraine were two pillars of the rebound.
- The trade war between the USA and over 70 countries weighed on the US dollar
Now that trade diplomacy has taken the upper hand, the US dollar has entered a technical rebound, with the result that the euro-dollar rate has entered a short-term downward retracement phase.
3) But the euro-dollar won't break through $1.15 until the Federal Reserve (FED) resumes cutting its federal funds rate.
So there are structural signals in favor of a rising euro dollar this year, driven by fiscal, macroeconomic and geopolitical fundamentals. But there is one divergence that still calls for caution: the famous divergence of monetary policies
Historically, there is a positive correlation between the euro-dollar rate and the anticipated rate differential between the Federal Reserve and the ECB. The narrower this rate differential, the more bullish the euro-dollar and vice versa.
Over the past few weeks, this expected rate differential has fallen with the Fed's intransigence regarding the risk of a rebound in US inflation due to tariffs. If the FED does not move, then it is unlikely that the EUR/USD rate will be able to break through $1.15 in the short term.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.