Next level
EURUSD has managed a relatively smooth ascent to its current levels, around 1.18. That is despite significant resistance levels, most notably around 1.17. A large collection of option strike prices gathered around this key level and the price history of the pair shows us its significance. Sustained closes above this level since last week add credibility to this move higher. This relative plain sailing has left many questioning whether EURUSD could now even touch 1.20.
In support of this case, the fair value of EURUSD has moved higher. This measure strips out the factors of market sentiment and considers fundamentals such as the relative terms of trade, inflation, and critically short-term swap rates across the currency pair. The fact the fair value of EURUSD has risen several cents in recent weeks means the risk premium of the pair is lower. Therefore, 1.20 would be more easily obtained without USD selling becoming over stretched.
These fundamentals that have allowed the Dollar to weaken once again are threefold: receding Fed rate expectations (including Fed independence questions), tariffs, and the deficit. There are key events happening this week which could impact each of these. Most notably, the debate of Trump’s One Big Beautiful Bill Act and a barrage of jobs data as is customary at the start of any month present major risks. Don’t forget too the expiry of reciprocal tariff pauses just around the corner next week.
The market is clearly still persuaded to sell the Dollar as evidenced most recently by its relatively limited buying of USD during a significant oil price spike and heavy selling once those risks receded. The question now will be whether there can be a material deterioration in each of those triggers to allow EURUSD to slip even higher. Expect heightened sensitivity to data this week starting today with Eurozone inflation data (10:00) and the US ISM survey (15:00).
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – A weaker Dollar: Trump vs. Powell
Charles Porter
Thu 26 Jun 2025
A weaker Dollar: Trump vs. Powell The Dollar continued to lose ground yesterday as the truce between Israel and Iran appeared to continue to hold. There has been a noticeable return to focus upon macro and monetary influences in major currency pairs. Yesterday, Fed Chair Jay Powell provided his semi-annual monetary policy report before the […]
Daily Brief – Whiplash
Charles Porter
Tue 24 Jun 2025
Whiplash A highly volatile start to yesterday’s trading session saw a flight to safety in markets. Despite the Dollar having lost much of its appeal as a safe haven lately, there was still an identifiable USD bid prior to and during the European open. We have identified recently how markets have clearly differentiated between general […]
Daily Brief – Top Trumps
Charles Porter
Thu 19 Jun 2025
Top Trumps Geopolitical risks are outweighing macroeconomic fundamentals in today’s markets. We can see this very clearly from the muted reactions in price being generated from major macro events including data and interest rate decisions. The same holds true of the Fed’s interest rate decision where markets barely blinked at a Fed that had changed […]
