empty
27.05.2025 12:23 AM
Complete Uncertainty: EUR/USD Outlook

In the eurozone, political issues have once again become a top priority. On May 24, U.S. President Trump announced plans to impose a 50% tariff on all goods from the EU starting June 1, 2025, stating that "talks with the EU are leading nowhere." However, the markets hardly reacted this time, as they have become accustomed to Trump's sudden decisions often being just as quickly reversed. Indeed, within two days, Trump again reversed his intention to implement the increased tariffs, returning the situation to its previous state.

According to Trump himself, the EU requested more time to "reach a favorable deal." It is unclear whether the two sides will manage to come to an agreement by July 9, but in any case, it seems unlikely that the final tariff level for the EU will end up at 50%. That understanding was enough to calm the markets.

Eurozone PMI indices look weak. The composite index fell to 49.5, entering contraction territory, primarily due to a decline in the services index, which dropped to 48.9. Considering that services account for 73% of the eurozone economy, this trend may signal a slowdown in real GDP growth — meaning that instead of a modest gain of 0.2% in the previous quarter, we could see zero or even negative growth in Q1.

This image is no longer relevant

A similar situation is unfolding in France and Germany, where service PMIs slowed to 47.7 and 47.2 respectively. Only relatively strong manufacturing kept the composite index at an acceptable level. In contrast, the U.S. showed stable growth in manufacturing and services activity.

European Central Bank officials are describing the current environment in bleak terms. Nagel captured this sentiment clearly by stating that uncertainty will likely become the new normal. Additionally, he noted that the current interest rate level is not restrictive, which may suggest a willingness to slow down the pace of rate cuts. Satunas sees a rate cut in June, followed by a pause. Market forecasts for the ECB imply that a June rate cut is inevitable, while expectations for the Fed have shifted toward autumn. For EUR/USD, this setup signals an increased likelihood of a downward reversal.

According to the latest CFTC report, speculative positioning on the euro deteriorated slightly over the reporting week; however, the accumulated bullish bias remains significant. The estimated price has settled below the long-term average, suggesting the bullish impulse is over, and a southward reversal is underway.

This image is no longer relevant

Last week, we forecasted that EUR/USD was finishing its upward movement and entering a sideways range with a downward bias. This forecast did not materialize — the euro still looks confident — but we continue to believe that the period of dollar weakness is nearing its end, and the local high of 1.1574 will not be breached. The current rise can be used to enter short positions, as we expect the euro to remain below 1.1425, making short entries with a stop just above that level quite justified. The target is the lower boundary of the range at 1.1065. As for the further trajectory, given the high level of uncertainty, it is too early to make definitive predictions.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Evgeny Klimov
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

XAU/USD. Analysis and Forecast

On Tuesday, gold is pulling back from the round $3400 level, which acted as resistance. However, in the lead-up to the August 1 deadline for the introduction of new tariffs

Irina Yanina 12:08 2025-07-22 UTC+2

Trump Continues Seeking Ways to Pressure China Through Other Countries

According to media reports, President Donald Trump's ongoing efforts to pressure China via its supply chain trading partners threaten to undermine the country's growth and much of its exports

Jakub Novak 10:30 2025-07-22 UTC+2

The European Union Takes on China

While the euro is gradually recovering after a major sell-off observed for most of this month, recent data shows that the latest round of EU sanctions has targeted a number

Jakub Novak 10:24 2025-07-22 UTC+2

The Closer We Get to August 1, the More Tense Market Conditions Become (Potential Decline in #USDX and USD/JPY Pair)

As August 1 approaches—the date previously announced by Donald Trump for the imposition of tariffs against U.S. trading partners—market participants are becoming increasingly focused on this issue, exercising caution

Pati Gani 10:14 2025-07-22 UTC+2

Market braces for 'Zombie Liberation Day'

Despite the looming August 1 deadline, when the White House's sweeping import tariffs are set to take effect, the S&P 500 keeps hitting new record highs. Step by step

Marek Petkovich 09:10 2025-07-22 UTC+2

What to Pay Attention to on July 22? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic reports scheduled for Tuesday. Therefore, weak market movements can be expected throughout the day. Of course, Donald Trump may at any moment retake center stage with

Paolo Greco 07:20 2025-07-22 UTC+2

GBP/USD Overview – July 22: American-Style Business in All Its Glory

The GBP/USD currency pair also traded higher on Monday, despite the absence of any local drivers. Let us recall that no fundamental or macroeconomic event was scheduled on the first

Paolo Greco 03:45 2025-07-22 UTC+2

EUR/USD Overview – July 22: The Dollar Has No Prospects

The EUR/USD currency pair traded higher throughout Monday. The rise in quotes began early in the morning and persisted for most of the day. Despite the lack of fundamental

Paolo Greco 03:45 2025-07-22 UTC+2

Trump Raises the Stakes in the Fight with the EU

The new week had barely begun when the dollar faced fresh reasons for decline. Over the past two weeks, there have been plenty of such reasons, but the market persisted

Chin Zhao 00:43 2025-07-22 UTC+2

EUR/USD: Bloomberg Leaks and Lutnick's Statements. Trade Talks in Focus

Last week, the euro-dollar pair traded within the range of 1.1560–1.1650, repeatedly testing the boundaries of this corridor. On Friday, traders attempted to consolidate above the 1.1650 resistance level

Irina Manzenko 00:42 2025-07-22 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.