Express Verdict — 2 Minutes
B+
Moderately Bullish — 72% Confidence — Long EUR Bias
What is EUR/USD?
EUR/USD is the most traded currency pair in the world, representing approximately 24% of the daily volume in the forex market (~$7,500 billion/day). It measures how many US dollars (USD) are needed to buy one euro (EUR). At 1.1867, the euro has appreciated +13.2% since its October 2024 lows (0.9535 in PPP-adjusted terms) and is trading near levels last seen in late 2021. The primary driver in 2026 is the dovish Fed vs stable ECB monetary divergence.
3 Reasons to Be Long EUR
- Favorable monetary divergence — Fed at 3.50% and cutting vs ECB stable at 2.00%. Spread narrowing in euro's favor
- Structurally weak dollar — DXY below 97, 14-month low. US twin deficits (budget + current account) weigh on USD
- German stimulus + EU defense — Fiscal stimulus in Germany + rising NATO defense spending support European growth
3 Reasons for Caution
- Technical resistance levels — EUR/USD approaching 1.19-1.20 zone, major multi-year resistance
- Fragile European growth — BofA sees 15% downside on EU equities. Private sector growth not accelerating
- Persistent geopolitical risk — Trump tariffs, US-EU trade tensions, and political uncertainty in France
Current Setup
Structural uptrend with immediate technical resistance — EUR/USD has been in an uptrend since October 2024, driven by dollar weakness and Fed/ECB divergence. RSI at 57.1 is neutral-bullish, with room before overbought. The 1.19-1.20 zone is key resistance: a breakout would open the path to 1.22-1.25. On rejection, support at 1.17 then 1.15 should hold. Bias remains long on 6-12 month horizon with consensus target at 1.20-1.22.
Market Fundamentals
1.1867
EUR/USD Spot
+13.2% vs 2024 low
97.01
DXY (Dollar Index)
-10% over 12 months
150 bps
Fed-ECB Spread
Narrowing
1.7%
Eurozone Inflation
Below 2% target
Macro Dashboard
| Indicator | Eurozone | United States | EUR/USD Impact |
|---|
| Policy rate | 2.00% (deposit) | 3.50-3.75% | Narrowing spread = bullish EUR |
| Inflation (CPI) | 1.7% (Jan.) | ~2.8% | EU below target, US above = dovish divergence |
| GDP growth | 1.2% (2026e) | ~2.1% (2026e) | US still ahead, but gap narrowing |
| Unemployment | ~6.0% | ~4.2% | US historically low, EU improving |
| Trade balance | Moderate surplus | Chronic deficit | Structurally favorable for EUR |
| Debt/GDP | ~90% | ~124% | US trajectory more concerning |
| PMI Manufacturing | ~48 (contraction) | ~47 (contraction) | Both struggling |
| PMI Services | ~52 (expansion) | ~51 (slowing) | EU resilient on services |
The 3 Pillars of EUR/USD
1. Interest rate differential: This is the #1 driver. When the Fed cuts rates while the ECB holds steady, the gap narrows, making the dollar less attractive and the euro more appealing. The spread has fallen from 250 bps to 150 bps in 12 months.
2. Capital flows: Flows into USD-denominated assets (Treasuries, tech stocks) supported the dollar for years. In 2026, rotation into EU equities (DAX +15% in 6 months) and German fiscal stimulus are attracting capital to Europe.
3. Current account: The chronic US current account deficit (~3.5% of GDP) structurally weighs on the dollar. The European surplus, combined with lower energy prices, supports the euro.
Fed vs ECB — Monetary Divergence
Federal Reserve
Rate: 3.50-3.75%
Trend: Dovish (cutting)
Next move: 1-2 cuts of 25 bps expected in 2026
Terminal rate: 3.00-3.25% (Goldman Sachs)
Chairman: Kevin Warsh (perceived hawkish but pragmatic)
The Fed has already cut 3 times in 2025 (from 5.25% to 3.50-3.75%). The US economy is slowing, manufacturing has been in contraction for 9 months, and Powell signaled no hikes are planned for 2026. Markets price 1-2 additional cuts.
European Central Bank
Rate: 2.00% (deposit)
Trend: Stable (on hold)
Next move: Hold in March, possible final 25 bps cut per BofA
Stance: "Good place" — Lagarde
Inflation: 1.7% (below 2% target)
The ECB held rates at its 5th consecutive meeting on February 5, 2026. Inflation at 1.7% is below target, but the labor market remains tight. 85% of economists surveyed see no change for the rest of 2026. Deutsche Bank sees the next hike in mid-2027.
Why this divergence favors the euro
The carry trade is the key mechanism: investors borrow in the low-rate currency to invest in the high-rate currency. When the Fed cuts rates toward the ECB's level, the dollar loses its yield advantage. The spread has fallen from 325 bps (mid-2023) to 150 bps today, and should reach 100-125 bps by end 2026. This compression is the primary driver of euro appreciation.
Technical Analysis
| Indicator | Value | Signal |
|---|
| RSI (14) | 57.1 | Neutral-bullish, not overbought |
| MACD | +0.0041 | Above signal, positive momentum |
| MACD Signal | +0.0041 | Convergence — trend strength balancing |
| EMA 20 | 1.1826 | Price above, dynamic support |
| EMA 50 | 1.1762 | Price above, uptrend confirmed |
| EMA 200 | 1.1560 | Price well above (+2.7%), LT bullish trend |
| ATR (14) | 0.0079 | Daily volatility ~79 pips |
Key Support & Resistance Levels
| Level | Type | Strength | Detail |
|---|
| 1.2000 | Resistance | Very strong | Major psychological level + Jan 2026 peak (1.1993) |
| 1.1900 | Resistance | Strong | Recent high, consolidation zone |
| 1.1840 | Resistance | Moderate | Current congestion zone |
| 1.1760 | Pivot | Strong | EMA 50 + support/resistance zone |
| 1.1700 | Support | Strong | Optimal accumulation zone (1.1685-1.1705) |
| 1.1600 | Support | Strong | EMA 200 (1.1560) + structural support |
| 1.1500 | Support | Very strong | Major support, 6 touches, floor of Jun-Dec 2025 consolidation |
Technical Structure
Confirmed uptrend — Price trading above all 3 EMAs (20/50/200), classic bull market configuration. Consolidation between 1.15 and 1.18 since June 2025 (8 months) resolved higher in late January with breakout toward 1.20. Current pullback to 1.19 is healthy and offers entry point. Central scenario: accumulation on 1.17-1.18, breakout above 1.20 toward 1.22-1.25.
EUR vs Major Currencies
0.913
EUR/CHF
-1.5% vs SMA50
182.24
EUR/JPY
+4.2% vs SMA200
1.365
GBP/USD
+8.6% over 1 year
EUR/CHF — Euro vs Swiss Franc
The euro is weak against the Swiss franc. EUR/CHF at 0.913 is near its 52-week low (0.909). The CHF remains the ultimate safe-haven currency in Europe, benefiting from structurally low inflation in Switzerland (0.2-0.3% vs 1.7% in eurozone), political stability and SNB's massive reserves.
| Pair | Spot | 52W High | 52W Low | SMA 50 | SMA 200 | Trend |
|---|
| EUR/CHF |
0.9130 |
0.9661 |
0.9095 |
0.9272 |
0.9321 |
Bearish — CHF dominant |
| EUR/GBP |
0.8695 |
0.8865 |
0.8235 |
0.8705 |
0.8657 |
Bullish — EUR gaining vs GBP |
| EUR/JPY |
182.24 |
186.86 |
154.81 |
183.51 |
174.98 |
Bullish — EUR strong vs JPY |
| USD/CHF |
0.7695 |
0.9054 |
0.7629 |
0.7890 |
0.8016 |
Bearish — USD very weak vs CHF |
EUR/CHF Analysis in Detail
The Swiss franc is outperforming all major currencies in 2026. Several factors explain this exceptional strength:
- Near-zero inflation — SNB forecasts 0.2% in 2025 and 0.3% in 2026, creating a real differential in favor of CHF
- Safe-haven value — Geopolitical tensions (Trump tariffs, Ukraine) and political uncertainty in France support CHF demand
- SNB on alert — SNB maintains rates but ready to intervene if CHF appreciates too rapidly (as it has historically)
- High productivity — Swiss economy is more productive per capita than eurozone, structurally supporting CHF
EUR/CHF Forecasts 2026
| Source | EUR/CHF Forecast (end 2026) | Comment |
|---|
| UBS | 0.94 | Gradual rebound if risk appetite returns |
| Raiffeisen | 0.91 | Gloomy EU outlook = strong CHF |
| Wallet Investor | 0.898 | Algorithmic modeling — very strong CHF |
| Consensus | 0.91-0.94 | CHF remains strong vs EUR in 2026 |
EUR/GBP — Euro vs British Pound
The euro is gaining ground against the pound sterling. EUR/GBP at 0.870 is at 2-month highs, driven by PM Starmer's political difficulties in the UK and anticipation of additional rate cuts by the Bank of England. ING sees EUR/GBP targeting 0.8740-0.8800 if political instability persists.
EUR/JPY — Euro vs Yen
The euro remains very strong against the Japanese yen, with EUR/JPY at 182.24. Despite gradual BoJ rate hikes (exit from negative rates in 2024), the differential remains huge (ECB 2.00% vs BoJ ~0.50%). The yen also suffers from massive carry trade.
EUR vs MAD, DZD & AED
10.83
EUR/MAD
+5.3% over 1 year
154.22
EUR/DZD
+11.1% over 1 year
4.357
EUR/AED
+16.8% over 1 year
9.136
USD/MAD
-8.5% over 1 year
Moroccan Dirham (MAD)
| Pair | Spot | 52W High | 52W Low | 1-Year Change |
|---|
| EUR/MAD | 10.832 | 10.842 | 9.999 | +8.3% — 52W ATH |
| USD/MAD | 9.136 | 9.981 | 8.646 | -8.5% — Weak dollar |
MAD and the Euro
The Moroccan dirham is pegged to a basket composed of 60% euro and 40% dollar. This peg explains why EUR/MAD is relatively stable but follows the euro's uptrend. With the euro strengthening against the dollar, EUR/MAD reaches new highs at 10.83. For Moroccans, this means imports from the eurozone become more expensive, while remittances from MRE (Moroccan Residents Abroad) from Europe have more local purchasing power. Bank Al-Maghrib maintains a policy of gradual MAD flexibility since 2018.
Algerian Dinar (DZD)
| Pair | Spot | 52W High | 52W Low | 1-Year Change |
|---|
| EUR/DZD | 154.22 | 155.05 | 138.85 | +11.1% — Near ATH |
| USD/DZD | 128.98 | 134.95 | 127.49 | -4.4% |
DZD Under Pressure
The Algerian dinar has lost over 11% against the euro in 12 months. Algeria, whose economy is highly dependent on hydrocarbons (95% of exports), sees its currency weaken with declining oil and natural gas prices. The official rate (154.2 DZD/EUR) is administered by the Bank of Algeria, but the parallel market rate is significantly higher (~240-250 DZD/EUR). The gap between official and parallel market remains a key indicator of DZD pressure.
UAE Dirham (AED)
| Pair | Spot | 52W High | 52W Low | 1-Year Change |
|---|
| EUR/AED | 4.357 | 4.411 | 3.729 | +16.8% — Very strong euro |
| USD/AED | 3.673 | 3.673 | 3.671 | Fixed peg at 3.6725 |
AED-USD Peg
The UAE dirham is pegged to the US dollar at a fixed rate of 3.6725 AED/USD since 1997. Consequently, EUR/AED is a near-perfect mirror of EUR/USD: when the euro rises against the dollar, it automatically rises against AED in the same proportions (+16.8%). For European expats in UAE or importing companies, a strong euro = more purchasing power in UAE dirhams. Conversely, for Emirati importers of European goods, it's a direct price increase.
EUR vs Emerging/MENA Currencies Summary
The euro massively outperforms MENA currencies in 2026. MAD (EUR/MAD 10.83) weakens moderately thanks to its euro-dollar basket peg. DZD (EUR/DZD 154.2) undergoes continuous devaluation linked to oil dependency. AED, being pegged to the dollar, perfectly reflects dollar weakness vs euro. Only the Swiss franc outperforms the euro among analyzed currencies, confirming its status as the ultimate safe haven.
Global Macro Context
| Market | Level | Change | EUR/USD Impact |
|---|
| S&P 500 | 6,836 | +3.4% | Neutral — bull market but weak dollar |
| DAX | 24,940 | +15% (6M) | Positive EUR — flows to Europe |
| FTSE 100 | 10,468 | +2% | Neutral |
| Nikkei 225 | 56,806 | +22% (1Y) | Weak yen = positive EUR/JPY |
| Gold (XAU) | $5,046 | +18.7% YTD | Weak dollar = strong gold = confirms USD weakness |
| DXY | 97.01 | -10% over 12 months | Primary driver of EUR/USD rise |
| TLT (20Y+ Bonds) | 89.70 | +0.5% | Stable long rates |
| BTC | ~$97,000 | +12% YTD | Risk-on but uncorrelated |
Current Market Regime
We are in a transition regime: the dollar is losing its ultra-dominant currency status as other economies catch up. German DAX (+15% in 6 months) outperforms S&P 500, a historic reversal driven by German fiscal stimulus and EU defense spending. Gold at $5,046 confirms loss of confidence in the dollar. VIX remains moderate, suggesting this rotation is orderly rather than panicked.
Institutional Forecasts
| Institution | EUR/USD Target (end 2026) | Bias | Comment |
|---|
| Deutsche Bank | 1.25 | Very bullish | German stimulus + geopolitics + global growth |
| MUFG | 1.24 | Bullish | DXY -5% additional in 2026 |
| Scotiabank | 1.22 | Bullish | US-EU rate convergence |
| UBS | 1.20 | Moderately bullish | Mid-2026 target |
| Consensus | 1.20-1.22 | Bullish | Weighted average of forecasts |
| Rabobank | 1.18 | Neutral | More cautious, sees plateau |
| Citi | 1.10 | Bearish | US re-accelerates, Fed less dovish than expected |
Long-Term Forecasts (2027-2030)
| Horizon | Estimated Range | Central Scenario | Key Factors |
|---|
| End 2027 | 1.18 - 1.28 | 1.22-1.25 | ECB potentially hiking, Fed on pause |
| End 2028 | 1.15 - 1.30 | 1.20-1.25 | Global normalization, US debt in focus |
| 2030 | 1.10 - 1.40 | 1.25-1.30 | Structural EU convergence + progressive de-dollarization |
Toward a New EUR/USD Regime?
In the very long term, the trend points toward rebalancing in favor of the euro. Structural factors include: (1) progressive de-dollarization of global FX reserves, (2) US budget deficit and rising debt (~124% of GDP), (3) European fiscal integration (mutualization via NextGenEU and defense spending), (4) European productivity catching up in certain segments. However, downside risks persist: EU political fragmentation (France, Italy), US lead in AI/tech, and lack of credible alternative to US Treasuries.
Trade Idea — Long Term
Long EUR/USD — 3-6 Month Horizon
Trade Thesis
Long EUR/USD on pullback to 1.17-1.18 zone, where EMA 50 (1.1762) and structural support converge. Stop below 1.15 (major support with 6 touches) offers clear invalidation. Target 1 at 1.20 (psychological resistance + consensus) is conservative objective. Target 2 at 1.2250 (Deutsche Bank / MUFG) is achievable if Fed continues cutting and German stimulus delivers. R/R: 1:2.0, compliant with institutional swing trading criteria. Catalysts: ECB meeting March 19 (new projections), next Fed decision, US employment data.
Risk Management
Recommended position sizing: 1-2% of capital per trade. The forex market is leveraged by nature — never use more than 5x leverage on a directional trade. A break below 1.15 would invalidate the bullish thesis and could bring the pair back to 1.12-1.13. Monitor Trump tariff announcements and US inflation surprises as negative catalysts.
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