The EUR/USD currency pair is once again becoming the focal point of global macro traders. While headlines remain obsessed with artificial intelligence stocks, election cycles, and short-term market noise, a deeper shift is quietly unfolding inside the foreign exchange market. Beneath the surface, the balance of power between the US dollar and the euro appears to be changing.
Trading near the 1.17 level, EUR/USD is no longer behaving like a short-term rebound. Instead, price action, monetary policy divergence, institutional positioning, and historical patterns suggest that the euro could be preparing for another sustained upside phase.
This article breaks down why EUR/USD may continue rising, what forces are weakening the US dollar, and how traders can interpret this shift using both macro fundamentals and technical structure.
A Turning Point for the US Dollar
For much of the past decade, the US dollar benefited from higher interest rates, strong capital inflows, and its role as the world’s reserve currency. That narrative is now under increasing pressure.
The Federal Reserve’s Policy Trap
Despite official rhetoric emphasizing economic resilience, the US economy is showing growing internal strain. Labor market data has become increasingly mixed, with unemployment gradually ticking higher while revisions quietly reduce previous job gains.
More importantly, the Federal Reserve is cornered.
Maintaining a “higher for longer” interest rate stance has become politically and fiscally unsustainable. Rising government debt servicing costs are forcing policymakers into an uncomfortable position. Markets are increasingly pricing in eventual rate cuts—not as a sign of strength, but as damage control.
This policy uncertainty is corrosive for the US dollar. As confidence in long-term monetary discipline erodes, the dollar loses its appeal as a safe store of value. For EUR/USD, this represents a structural tailwind.
Europe’s Resilience Is Underestimated
One of the most persistent misconceptions in recent years has been the expectation of a prolonged European collapse. That scenario has not materialized.
The Eurozone Avoided the Worst-Case Scenario
While Europe faced energy shocks, geopolitical risks, and slowing growth, the feared deep recession never arrived. Instead, core economies stabilized, supply chains adjusted, and inflation began cooling toward target levels.
The European Central Bank (ECB), once viewed as perpetually behind the curve, is now adopting a more balanced and cautious tone. Unlike the Federal Reserve, the ECB is not under immediate pressure to aggressively ease policy.
This matters because monetary policy divergence is one of the most powerful drivers of EUR/USD trends.
- US outlook: Growing expectations of rate cuts
- Eurozone outlook: Measured, cautious, and less reactive
That divergence strengthens the euro by default.
EUR/USD and Policy Divergence: The Core Bullish Engine
Currency markets rarely move on emotion alone. They move on relative expectations.
When investors compare EUR/USD, they are effectively comparing:
- Fiscal discipline vs. fiscal stress
- Monetary credibility vs. forced intervention
- Stability vs. uncertainty
Right now, the euro is increasingly seen as the “less risky” side of that equation.
As capital reallocates globally, even marginal preference shifts can drive large moves in major currency pairs like EUR/USD.
Technical Structure: The Charts Support the Macro Case
Beyond fundamentals, technical analysis reinforces the bullish EUR/USD narrative.
Key Levels and Market Structure
EUR/USD has been forming a clear ascending channel on higher timeframes. The 1.1700 region has emerged as a critical structural level.
As long as price remains above this zone:
- Downside momentum remains limited
- Short sellers remain under pressure
- Breakout probability increases
Momentum indicators suggest consolidation rather than exhaustion, which typically precedes continuation moves rather than reversals.
If resistance near the 1.1750–1.1780 area gives way, EUR/USD could accelerate rapidly as algorithmic systems and trend-following funds re-engage.
Institutional Positioning: Smart Money Is Already Adjusting
Retail sentiment often lags behind reality. Institutional capital does not.
Large asset managers, macro hedge funds, and sovereign entities are increasingly aligning around a longer-term view: US dollar weakness is structural, not temporary.
This is not about one data release or one central bank meeting. It is about long-term debt sustainability, demographic pressures, and global reserve diversification.
Positioning data suggests that dips in EUR/USD are increasingly being bought, not sold. That behavioral shift alone marks a major trend transition.
Historical Context: Momentum Has a Memory
Zooming out reveals an important truth.
EUR/USD has already delivered a strong multi-month advance, gaining over 10% from its prior cycle lows. Historically, such moves are rarely isolated events. They often represent the first phase of a longer realignment.
Strong trends tend to build “price floors,” meaning future pullbacks become shallower and shorter-lived. This dynamic creates favorable risk-reward conditions for trend-following strategies.
For traders looking to better understand these macro cycles, resources that learn more about market structure and capital flows can be particularly valuable.
Trading EUR/USD in a Shifting Macro Environment
For traders, understanding direction is only half the equation. Execution and risk management matter just as much.
Many professionals prefer to refine their strategies using a demo account before committing capital, especially during high-volatility macro transitions.
Once confident, opening a trading account allows traders to access EUR/USD with institutional-grade liquidity and tight spreads through platforms like Ultima Markets.
Risks to the EUR/USD Bullish Scenario
No trend is guaranteed.
Potential risks include:
- A sudden resurgence of US inflation forcing renewed Fed tightening
- Unexpected eurozone political instability
- Global risk-off shocks that temporarily favor USD liquidity
However, these risks currently appear secondary compared to the dominant structural forces pressuring the dollar.
Conclusion: EUR/USD and the Bigger Picture
EUR/USD is not rising because Europe is perfect. It is rising because relative conditions favor the euro over the US dollar.
A constrained Federal Reserve, resilient eurozone fundamentals, supportive technical structure, and institutional capital alignment all point in the same direction.
As global markets enter a new phase of monetary adjustment, EUR/USD may continue to reflect a broader re-pricing of trust, discipline, and purchasing power.
For traders and investors alike, ignoring this shift could be costly.
FAQ
Q1: Is EUR/USD still bullish above 1.17?
As long as price holds above key structural support near 1.1700, the bullish bias remains intact.
Q2: What drives EUR/USD the most right now?
Monetary policy divergence between the Federal Reserve and the ECB is currently the dominant driver.
Q3: Can EUR/USD pull back before moving higher?
Yes. Consolidations and shallow pullbacks are normal within strong trends.
Q4: Is EUR/USD suitable for beginners?
EUR/USD is one of the most liquid and widely traded currency pairs, making it suitable for both beginners and experienced traders when managed responsibly.
Q5: How important is risk management when trading EUR/USD?
Extremely important. Even high-probability setups require proper position sizing and disciplined risk control.
This article represents the author’s personal views only and is for reference purposes. It does not constitute any professional advice.