EUR/USD Weakness and the Dollar's Resurgence: A Strategic Buy Opportunity in USD-Crosses

The EUR/USD pair has entered a critical juncture, marked by a confluence of technical indicators and macroeconomic fundamentals that signal a sustained bearish bias for the euro and a strengthening U.S. dollar. This alignment of technical and macroeconomic factors creates a compelling case for investors to consider strategic long positions in USD-crosses, particularly against the euro.

Technical Indicators Signal Prolonged Weakness in EUR/USD

From a technical perspective, the EUR/USD pair is entrenched in a bearish phase. The 14-day Relative Strength Index (RSI) stands at 38.945, nearing oversold territory but failing to generate a convincing reversal pattern according to technical analysis. This suggests that sellers remain dominant, with buyers hesitant to commit despite the euro's declining momentum. Meanwhile, moving averages (MAs) reinforce this bearish narrative: the pair is trading below all its key MAs on the 4-hour chart, with the 20-period SMA at 1.1695 and the 100-period SMA at 1.1740 acting as immediate resistance levels as reported by technical data. On the daily chart, the euro clings to a flat 100-day SMA at 1.1667, with a weekly low of 1.1659 hinting at further downside potential.

Critical support and resistance levels further underscore the euro's vulnerability. A breakdown below the 1.1640 level-a key support zone identified by analysts-could trigger a cascade of bearish follow-through, potentially testing the 1.15090 major support level according to technical analysis. Conversely, a sustained break above the 1.1700–1.1800 resistance cluster might offer a temporary reprieve, but the broader technical picture remains skewed toward the dollar. Intraday traders are closely watching pivot points, such as the 1.16787 last price, with 1.16943 as the first resistance and 1.16646 as the first support as technical indicators show. These levels highlight the euro's fragility and the dollar's resilience in the near term.

Macroeconomic Fundamentals Cement the Dollar's Strength

The technical bearishness of EUR/USD is not an isolated phenomenon but is deeply rooted in divergent macroeconomic trajectories between the U.S. and the Eurozone. The U.S. economy, despite facing headwinds such as a slowing labor market and elevated inflation, has maintained a structural advantage over its European counterpart.

The Federal Reserve's current policy stance, with the federal-funds rate at 4.25%-4.5%, starkly contrasts with the European Central Bank's 2% deposit rate according to market analysis. This 200-basis-point differential has been a cornerstone of the dollar's strength in 2025 and early 2026. Higher U.S. interest rates have bolstered capital inflows into dollar assets, while the ECB's decision to end its easing cycle has left the euro exposed to external pressures. Projections indicate that this divergence will persist, with the Fed expected to cut rates further by year-end 2026, potentially pushing the EUR/USD pair toward 1.22 .

On the growth front, the U.S. is projected to outperform the Eurozone in 2025 and 2026. Real GDP growth is expected to reach 1.8% in the U.S. compared to 1.4% in the Eurozone according to economic projections. This gap is driven by resilient consumer spending and AI-driven infrastructure investments in the U.S., while the Eurozone grapples with weaker economic confidence and slower productivity gains. Inflation trends also favor the dollar: U.S. core PCE is forecast to remain above 3% in 2026, compared to the Eurozone's projected 1.9% according to ECB projections. Although higher inflation typically weakens a currency, the Fed's credibility in managing inflation expectations has offset this risk, reinforcing the dollar's safe-haven appeal.

Strategic Implications for Investors

The convergence of technical and macroeconomic factors presents a clear opportunity for investors to capitalize on the dollar's resurgence. USD-crosses, particularly EUR/USD, offer a compelling risk-reward profile. Technically, the euro's proximity to key support levels (e.g., 1.1640) suggests that a breakdown could accelerate the pair's decline toward 1.15090. Macroprudently, the U.S.-Eurozone interest rate differential and growth divergence provide a tailwind for the dollar's long-term strength.

However, investors must remain vigilant. The euro has shown resilience in the face of fiscal and strategic shifts in Europe, and a surprise policy pivot by the ECB or a surge in U.S. political risks could temporarily disrupt the dollar's momentum according to research analysis. That said, the broader trend remains firmly in favor of the dollar, with both technical indicators and macroeconomic fundamentals aligning to support a bullish USD outlook.

For those seeking to position for this convergence, a disciplined approach to risk management-such as setting stop-loss orders near key resistance levels like 1.1700-can help mitigate short-term volatility while capturing the dollar's long-term potential.