Euro soars through 1.0700. Where next for EUR/USD?

EURO SURGES 4% TO START MARCH

The euro is on track for its best week since 2022 against the dollar and other currencies, driven by the strong response from European countries to defend Ukraine after US-Ukraine relations soured last week. Germany sparked the biggest rally in the euro after announcing a €500 billion infrastructure fund to modernize its military and revive growth on Tuesday. Compounded with widespread US dollar weakness, EUR/USD has popped 4% from last week's close to near 1.0800, reaching its highest level since November's election. The pair had previously struggled to sustain prices above 1.0500 throughout the year, testing this threshold multiple times with little confidence until Tuesday's breakthrough. Technical analysts will note that EUR/USD now trades above its 200-day moving average for the first time since November.

EUR/USD PRICE HISTORY

TARIFF TROUBLES ADD TO USD WEAKNESS

In a turnaround from recent tariff developments, Trump's preferred negotiation tactic is now hampering the strength of the US dollar. While tariffs against Canada, Mexico, and China were expected to bolster the dollar, especially against those countries' currencies, each nation has instead announced stronger-than-expected retaliatory measures. These countermoves have led markets to question US growth prospects under these conditions. This dynamic has trickled into the EUR/USD market, exacerbating the euro's gains.

ECB RATE CUT EXPECTED TOMORROW

While this week's ECB meeting was expected to be the highlight, rapidly developing foreign policy and trade measures have likely overshadowed its impact on the euro. Nevertheless, the ECB meets tomorrow morning at 8:15am EST and is widely expected to cut its key rate by 25bps to 2.5%. Though this move is likely priced into the euro's value, the central bank could offer clarity about when cuts will stop, given this will be their sixth reduction since May of last year. Current forecasts suggest rates will continue falling to 2% this year.

EXPLORING EURO-YEN TRADES FOR DIVERSIFICATION

For traders seeking euro exposure while mitigating US dollar risk, EUR/JPY and EUR/CHF present compelling alternatives. EUR/JPY is bouncing strongly off of last week's multi-year low, and EUR/CHF has just hit a 7-month high. These cross pairs offer a distinct perspective on euro dynamics, helping traders navigate fluctuations without direct US dollar involvement. This approach highlights the importance of diversification and strategic positioning in a complex trading environment.

How to trade EUR

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on EUR pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like USD/CAD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing. Past performance is not indicative of future results.