EURUSD consolidates at a key support zone as we await the next catalyst | Forexlive

The euro had a great performance year to date mainly due to the increased German fiscal spending expectations and Trump’s tariffs. In the last four weeks though, the EURUSD pair hasn’t done much due to the lack of key developments on the trade and interest rates front.

The ECB continues to cut rates amid economic uncertainty and expected slowdown from tariffs. The Fed, on the other hand, is keeping rates steady amid inflation uncertainty.

The short dollar trade is also overstretched, so there’s the risk of some unwinding of the positioning in case the market reprices its dovish expectations for the Fed.

Today, we will have the first test as the Fed could push back against the 80 bps of easing priced in by the market giving the greenback a boost. The next key area to watch is trade negotiations as positive developments there could see further unwinding of the short dollar trade.

On the 4 hour chart, we can see that the EURUSD pair is consolidating at a key support zone around the 1.1278 level where we can also find a trendline for confluence. This is where we can expect the buyers to step in with a defined risk below the trendline to position for a rally into the 1.16 handle. The sellers, on the other hand, will look for a break lower to start targeting the 1.09 handle next.

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