EUR/USD Outlook: Dollar Strength Keeps Pair Range-Bound

Dollar Outlook: Can the Recovery Extend?

The US dollar has gradually strengthened over recent weeks, supported by firmer macro data and resilient economic signals. Retail sales and jobless claims have surprised to the upside, while the Fed’s Beige Book continues to describe an economy expanding at a measured pace with no clear signs of labour market stress.

Latest initial jobless claims fell below 200,000, pulling the four-week average to its lowest level in nearly two years. This reinforces the view of a labour market cooling slowly, with hiring subdued but layoffs still limited. Manufacturing data also exceeded expectations, with both the Empire State and Philly Fed indices printing well above consensus.

As a result, markets have scaled back expectations for a first-quarter Fed rate cut, now pricing roughly a 20% probability. Fed officials have also maintained a cautious and hawkish tone, helping keep the dollar supported.

With today’s US data calendar relatively light, there is little immediate reason to fade the dollar’s bid. One risk to monitor over the coming weeks is potential coordinated intervention to sell USD/JPY near the 160 level, especially given apparent support from the US Treasury. For now, however, dollar dips continue to attract demand.

Euro Outlook: Lack of Directional Drivers

EUR/USD volatility has declined notably, reinforcing expectations of continued range trading. With investor interest gravitating toward higher-yielding currencies and precious metals, demand for the relatively stable euro remains muted.

The eurozone data calendar offers little in the way of meaningful catalysts, leaving EUR/USD without a clear fundamental driver. In this environment, the near-term outlook remains modestly bearish.

Technical Outlook and Key Levels

The break below the 1.1620 to 1.1635 support zone shifts focus to this area as key resistance. Failure to reclaim this region would keep downside risks in play.

• Resistance: 1.1620 to 1.1635

• Support: 1.1580 (200-day moving average)

• Lower support: 1.1500

A move toward the 1.1580 area looks likely if downside momentum resumes. Below that, support becomes sparse until the 1.1500 level. The technical outlook would only turn constructive if EUR/USD were to break decisively out of its broader bearish channel.

EUR/USD Daily Chart

Bottom Line

EUR/USD remains constrained by a firm US dollar, subdued volatility, and a lack of euro-specific catalysts. While short-term bounces are possible, the broader setup favours range-bound trade with a mild downside bias unless the macro or technical picture shifts materially.