EURUSD Continued Consolidation with Bearish Bias

Based on the current economic data the most probable scenario for EURUSD revolves around continued consolidation with a moderate bearish bias as the ECB nears its target while the Fed remains restricted by resilient US data. So most likely EURUSD will keep bouncing around the $1.16 to $1.18 range for the next few weeks.

What We Have

Even though the Eurozone economy is barely growing - GDP annual growth rate is 0.8%, inflation jumped to 3% in April, meaning ECB can't just cut interest rates. Inflation could probably increase even more in coming months because of a war and consequent higher oil prices.

Usually, high US interest rates (3.75%) make the Dollar stronger, but because markets are already expecting the Fed to do nothing until 2027, the shock factor is gone. The Dollar only spikes now when there’s a new scary headline about the war.

Both economies are being hit by the same problem: $100+ oil. This slows down growth in both the US and Europe simultaneously, which cancels out any major currency advantage.

Most Likely Range Trading

1. The Ceiling ($1.192): Every time the Euro gets close to 1.18, traders sell it. There’s too much political risk, like the threat of new US tariffs on EU goods, for the Euro to go much higher.
2. The Floor ($1.156): Every time it drops toward 1.156, buyers step in because the ECB is turning hawkish to fight 3% inflation.

The Bottom Line

Don't look for a massive rally, most probable move is a sideways sliding. And the slight edge goes to the Dollar (bearish for EURUSD) simply because the US economy is fundamentally more durable (2.7% growth vs 0.8% in Europe) and can handle the high energy prices better than Europe can.

EURUSD is right below resistance, without a massive surprise in the upcoming data, expect the Euro to drift back toward, but not close, to 200-day average near 1.1670.