Euro Holds Firm Amid Dollar Weakness and ECB Policy Clarity

 Key Takeaways:

*Fiscal concerns over U.S. tax cuts and widening deficits have undermined the dollar, providing support for the euro.

*Resilient eurozone fundamentals and anchored inflation reinforce expectations that the ECB may pause rate cuts, boosting euro sentiment.

*The ECB’s renewed commitment to launching a digital euro has strengthened investor confidence and signaled long-term monetary sovereignty.

Market Summary:

The euro remained broadly stable against its G7 peers, supported by a combination of fiscal concerns weighing on the U.S. dollar and relatively resilient economic fundamentals within the eurozone. Uncertainty surrounding U.S. trade policy and the widening fiscal deficit—exacerbated by the Trump administration’s proposed tax cuts—has led investors to question the credibility of the greenback, offering support to the euro.

In contrast, the eurozone continues to benefit from a more predictable monetary policy outlook. Inflation remains anchored near the European Central Bank’s 2% target, reinforcing expectations that the ECB may soon bring its easing cycle to a close. ECB President Christine Lagarde has signaled that further rate cuts may not be necessary, strengthening the euro’s near-term outlook.

Adding to the euro’s buoyancy was the ECB’s recent policy panel held in Portugal, where central bankers discussed adapting to the evolving financial landscape. The ECB reaffirmed its commitment to launching a digital euro, citing the need to safeguard Europe’s monetary sovereignty and competitiveness in the face of growing adoption of private digital currencies such as stablecoins. The initiative has helped bolster investor confidence in the euro, alongside improving geopolitical stability within the region.

Looking ahead, traders will closely monitor today’s eurozone unemployment rate and remarks from ECB President Christine Lagarde for further cues on policy direction and potential catalysts for euro price action.

Technical Analysis

EURAUD, H4

The EUR/AUD pair remains in an uptrend, but is currently testing a critical resistance level near 1.7985. Price action has formed an ascending triangle pattern—typically a bullish continuation signal—suggesting that a confirmed breakout above this level could open the door for further upside.

However, momentum indicators point to a potential slowdown in bullish strength. The Relative Strength Index (RSI) remains above 50, but has been gradually trending lower, signaling a loss of upward momentum. Similarly, the MACD is retreating toward the zero line from above, reflecting a possible pause or reversal in the trend.

A decisive break above 1.7985 with strong volume would reinforce the bullish case. Otherwise, failure to breach the resistance may prompt a short-term pullback or consolidation phase. 

Resistance levels: 1.8260, 1.8525

Support levels: 1.7730, 1.7480