EUR/USD analysis: Rally may be under threat
2025-07-02 18:24:43
Since the beginning of this year, as market confidence in the United States continues to weaken, the euro has appreciated by about 15% against the dollar. Philip Lane, chief economist of the European Central Bank, pointed out in an interview: "Global investors are turning back to euro assets to a certain extent."
Meanwhile, European Central Bank officials expressed concerns that the euro's rapid strengthening could hamper efforts to stabilize inflation at 2%. They warned that a breakout of the euro-dollar exchange rate above 1.20 could pose risks to inflation and the competitiveness of export-oriented companies, an issue raised at the ECB's "Central Bank Forum" in Portugal.
Can EUR/USD reach the 1.20 mark?
From a technical analysis perspective, EUR/USD is showing bearish signals:
(Source of EUR/USD 4-hour chart: Yihuitong)
If the rally in early April (coinciding with Trump’s announcement of new tariffs) is regarded as the initial impulse wave A→B, and the May low is regarded as the end point of the adjustment wave B→C, then according to the Fibonacci extension theory, the currency pair has now risen to the key resistance area near 1.1850 (as shown by the arrow in the figure).
Moreover, the relative strength index (RSI) shows a strong overbought signal and the price is hovering near the upper boundary of the ascending channel, which usually acts as resistance.
Taking all the above factors into consideration, EUR/USD may be in a vulnerable state and may face correction pressure in the short term, with the target possibly pointing to the lower track of the channel, and the support at the 1.1620 level will further strengthen this position. However, in the current fundamental environment, this does not change the long-term bullish outlook for the euro.
Meanwhile, European Central Bank officials expressed concerns that the euro's rapid strengthening could hamper efforts to stabilize inflation at 2%. They warned that a breakout of the euro-dollar exchange rate above 1.20 could pose risks to inflation and the competitiveness of export-oriented companies, an issue raised at the ECB's "Central Bank Forum" in Portugal.
Can EUR/USD reach the 1.20 mark?
From a technical analysis perspective, EUR/USD is showing bearish signals:
(Source of EUR/USD 4-hour chart: Yihuitong)
If the rally in early April (coinciding with Trump’s announcement of new tariffs) is regarded as the initial impulse wave A→B, and the May low is regarded as the end point of the adjustment wave B→C, then according to the Fibonacci extension theory, the currency pair has now risen to the key resistance area near 1.1850 (as shown by the arrow in the figure).
Moreover, the relative strength index (RSI) shows a strong overbought signal and the price is hovering near the upper boundary of the ascending channel, which usually acts as resistance.
Taking all the above factors into consideration, EUR/USD may be in a vulnerable state and may face correction pressure in the short term, with the target possibly pointing to the lower track of the channel, and the support at the 1.1620 level will further strengthen this position. However, in the current fundamental environment, this does not change the long-term bullish outlook for the euro.
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