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
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
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

GBP/JPY. Analysis and Forecast

During the European session on Monday, the GBP/JPY currency pair is approaching the 198.30 level. The pair finds some support from UK housing data: in June, house prices rose

Irina Yanina 19:40 2025-07-07 UTC+2

XAU/USD. Geopolitical Risks May Provide Additional Support to the Safe-Haven Precious Metal

Today, gold is displaying an intraday bearish tone despite rebounding from the $3300 level. Strengthening demand for the US dollar remains the primary factor pressuring gold, limiting its upward movement

Irina Yanina 19:09 2025-07-07 UTC+2

Bitcoin leads turbulent life

Beneath the calm surface of BTC/USD lie turbulent underwater currents that are reshaping the cryptocurrency market structure. Still waters run deep. On the surface, it seems that life

Marek Petkovich 15:48 2025-07-07 UTC+2

USD/JPY. Analysis and Forecast

The USD/JPY pair maintains a bullish bias, staying above the psychological level of 145.00, reflecting intraday selling pressure on the Japanese yen amid U.S. dollar strength. Investors are concerned that

Irina Yanina 12:59 2025-07-07 UTC+2

USD/CAD. Analysis and Forecast

On Monday, the USD/CAD pair continued its upward movement for the second day in a row. This rise is driven by a combination of factors. Crude oil prices initially declined

Irina Yanina 12:39 2025-07-07 UTC+2

GBP/USD. Analysis and Forecast

The GBP/USD pair began the new week attempting to hold the key psychological level of 1.3600. However, amid mixed fundamental factors, it has not been successful so far. The British

Irina Yanina 12:14 2025-07-07 UTC+2

Three days left to avert tariffs

As July 9, the deadline set by Trump, approaches, the United States main trading partners spent the weekend rushing to finalize trade agreements or lobbying for more time. Meanwhile, Treasury

Jakub Novak 11:24 2025-07-07 UTC+2

Investors see no alternatives

Uncertainty is commonly the enemy of investment, but not in 2025. A double dose of unpredictability – from geopolitics and White House tariffs – hasn't stopped the S&P 500 from

Marek Petkovich 11:17 2025-07-07 UTC+2

What to Watch on July 7th? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic publications are scheduled for Monday, and none of them are significant. Let us recall that Friday was practically a semi-holiday, as the United States celebrated Independence

Paolo Greco 08:29 2025-07-07 UTC+2

GBP/USD Overview on July 7, 2025

The GBP/USD currency pair remained nearly flat throughout Friday, as the U.S. trading session was essentially inactive on that day. There were no macroeconomic publications, and the market chose

Paolo Greco 07:25 2025-07-07 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.