empty
20.03.2025 12:43 AM
Euro Hits the Ceiling

Bets are now closed, ladies and gentlemen! Many have already played out. The EUR/USD's hesitation to rise following the Bundestag's approval of Friedrich Merz's fiscal stimulus package indicates that this factor is already reflected in the main currency pair. The drop below 1.09 is a result of selling the euro based on the facts, after initial buying on the rumors. The event is significant and comparable to the Marshall Plan for post-war Europe. But its effects will be felt later. For now, all eyes should be on the Federal Reserve.

According to Danske Bank, the potential for a EUR/USD rally from current levels is limited, as many bullish drivers have already been factored in. This includes the German fiscal deal, a ceasefire in Ukraine, and three anticipated rate cuts by the Fed in 2025. Germany operated under fiscal restraint for a long time, maintaining the lowest debt-to-GDP ratio among major Eurozone economies.

Debt-to-GDP Ratio Dynamics

This image is no longer relevant

This frugality held back GDP growth. Moreover, the Ukraine conflict and the resulting energy crisis led to a contraction of the German economy in 2023–2024. Bloomberg estimates that fiscal stimulus could push growth to 2% by 2040.

However, this process will take time, meaning speculators may start unwinding long positions on EUR/USD after an extended rally especially since asset managers have pushed net long positions in the euro to a five-month high. In this environment, any event could trigger a sell-off.

EUR Positioning Among Asset Managers and Hedge Funds

This image is no longer relevant

Markets are overly optimistic about a swift end to the war in Eastern Europe, which would be excellent news for the Eurozone economy. However, Russia's refusal to agree to a 30-day truce suggests that the White House has plenty of work ahead. Peace is still far off, meaning EUR/USD valuations may have climbed too high.

The futures market currently prices in just under three rate cuts by the Fed in 2025. Even if the FOMC revises its projections from two cuts in December to three, this won't be enough to trigger mass buying of EUR/USD. However, if the Fed signals only two or fewer rate cuts this year, it could be a strong bearish signal for the currency pair.

This image is no longer relevant

Let's also not forget the looming trade war between the EU and the U.S., which supports Goldman Sachs' bearish stance on the euro. Despite this, the bank has raised its EUR/USD forecasts from $1.01 to $1.06 (6 months) and $0.99 to $1.02 (12 months).

From a technical perspective, the daily EUR/USD chart still risks triggering the Anti-Turtles reversal pattern. Therefore, a drop below 1.089 is a signal to sell. Buying should only be considered if this level holds after testing or if the pair rebounds to 1.093.

Marek Petkovich,
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

What to Pay Attention to on April 23? A Breakdown of Fundamental Events for Beginners

A considerable number of macroeconomic events are scheduled for Wednesday. All of them are Purchasing Managers' Index (PMI) reports for April in the services and manufacturing sectors. The indices will

Paolo Greco 07:01 2025-04-23 UTC+2

GBP/USD Overview – April 23: The British Pound Can't Stop Smiling

On Tuesday, the GBP/USD currency pair traded much more calmly, yet again showed signs of a "maxed-out flat" pattern. As previously noted, the US dollar has only had two behaviors

Paolo Greco 04:56 2025-04-23 UTC+2

EUR/USD Overview – April 23: Another Calm Before Another Collapse?

The EUR/USD currency pair traded more calmly on Tuesday than on Monday. The US dollar managed to avoid another fall, but it's too early to celebrate. The greenback can collapse

Paolo Greco 04:56 2025-04-23 UTC+2

USD/JPY. On the Threshold of the 139th Figure

The USD/JPY pair has been in a consistent downtrend for the fourth consecutive week. On Tuesday, sellers pushed the pair to the edge of the 139.00 area, hitting the lowest

Irina Manzenko 00:46 2025-04-23 UTC+2

The Dollar Has Been Replaced. Nature Abhors a Vacuum

Fear paralyzes, but action persists. Investors are slowly overcoming their concerns over Donald Trump's attacks on the independence of the Federal Reserve and are starting to lock in profits

Marek Petkovich 00:08 2025-04-23 UTC+2

Bitcoin Took Its Chance

Slow and steady wins the race! Bitcoin quietly broke through to its highest levels since early March amid Donald Trump's attacks on Jerome Powell. When the independence of the Federal

Marek Petkovich 00:08 2025-04-23 UTC+2

XAU/USD. Analysis and Forecast

After setting a new all-time high at $3500 under overbought conditions, gold prices are pulling back. Nevertheless, bullish sentiment remains strong due to persistent concerns over the potential economic fallout

Irina Yanina 19:02 2025-04-22 UTC+2

EUR/GBP. Analysis and Forecast

The EUR/GBP pair is losing ground today after two consecutive days of gains, trading near the psychological level of 0.8600. The pound is receiving support from optimism surrounding ongoing trade

Irina Yanina 11:52 2025-04-22 UTC+2

Why the U.S. Dollar Keeps Falling

The U.S. dollar fell to its lowest level since January 2024 after President Donald Trump's criticism of the Federal Reserve sparked concerns over the central bank's independence. The dollar weakened

Jakub Novak 11:12 2025-04-22 UTC+2

Loss of Confidence in the Fed Will Pressure the Dollar (Bitcoin Likely to Continue Rising, USD/CAD to Decline)

On Monday, the U.S. stock market experienced a sharp decline, pulling down many global exchanges, as the "turbulent" actions of President Trump continue to shift from one hot topic

Pati Gani 09:00 2025-04-22 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.