EUR/USD (EURUSD) Surges Toward 1.1830 as Dollar Sinks and Eurozone Optimism Builds

EUR/USD Bulls Target 1.1830 as Dollar Weakens and ECB Maintains Grip

Breakout Momentum Builds in EUR/USD on Technical Surge and Dovish Fed Pricing

EUR/USD has decisively reclaimed territory above the key 1.1720 barrier, shifting sentiment from range-bound indecision to clear upside follow-through. The pair surged as the U.S. Dollar Index (DXY) cracked below 97.15, its lowest mark since July 7, reflecting deepening macro and political instability across the dollar bloc. Despite July's flash PMIs coming in line, traders focused on the crumbling support under the DXY, driven by soft inflation expectations, a dovish Fed pricing curve, and political volatility stemming from Trump’s criticism of Fed Chair Powell and the looming August 1 tariff deadline.

The break above 1.1700–1.1720 came after weeks of euro accumulation around 1.1600, where buyers defended multiple tests of structure, bolstered by a hawkish repricing of the ECB. Price now consolidates just under 1.17825, eyeing 1.18085, with upside extension toward 1.1830–1.18400 possible if DXY continues sliding toward 96.74 or lower. The bullish trajectory holds as long as EUR/USD maintains above 1.17216, which has now flipped into structural support.

Political Undercurrents and Trade Optimism Reshape Risk Appetite

The pair’s rally coincides with fading risks around a U.S.-EU trade war. Officials have floated a reciprocal 15% tariff proposal, slashing fears of the 30%+ tariffs Trump previously threatened. Combined with a stabilizing services sector in Germany and France, eurozone macro data no longer pressures the ECB to deliver immediate cuts. Traders still price one cut by December, but current inflation prints and PMI data offer no urgency.

Meanwhile, markets are digesting U.S. instability: Powell’s leadership is under fire, with Treasury Secretary Scott Bessent hinting at a new Fed nomination in early 2026. As real yield momentum decays, risk assets have benefited—pulling EUR/USD higher alongside equity benchmarks like the S&P 500 and Nasdaq, which recently hit fresh highs.

Technical Setup: Fair Value Gap Reclaim and Channel Alignment Support Bulls

Technically, EUR/USD operates inside a rising channel, supported by the 50-EMA and 100-EMA crossover. The successful breakout from 1.17216 has shifted this zone into a price floor. A newly formed Fair Value Gap (FVG) between 1.17395–1.17457 offers a rebound zone, should price retest before pushing to the next resistance at 1.1830.

Indicators echo the bullish trend. The RSI remains firm above 60, while MACD lines widen in bullish alignment. Bulls dominate as long as the pair stays above 1.17550, with broader gains capped only by the extended resistance at 1.1900.

Dollar Suffers as Fed Signals Pause and Japan Instability Adds Pressure

U.S. dollar weakness stems from more than just macro softness. The Fed’s projected pause through Q3, combined with weak CPI, declining housing data, and Trump’s public clashes with Powell, has destabilized confidence. The University of Michigan survey posted a drop in 1-year inflation expectations to 4.4%, its lowest since February. Meanwhile, political instability in Japan has further weighed on USD demand, pushing global flows out of defensive FX holdings.

Key data ahead includes jobless claims, new home sales, and the Chicago Fed index, all of which may either reinforce or break the dollar’s bearish momentum. Unless the DXY reclaims 97.55, downside continuation remains the base case.

ECB Strategy Firm as Eurozone Avoids Crisis Mode

The ECB, set to announce its main refinancing rate, is unlikely to alter policy this week. Internal inflation dynamics are "evolving in line," according to policymakers, giving the central bank space to remain patient. If President Lagarde avoids dovish tilts in the press conference, euro support could extend.

Notably, despite trade war anxiety earlier in July, the euro has regained its bullish footing as geopolitical risk fades. This reflects a broader narrative shift: eurozone stability now looks more appealing than dollar vulnerability. Traders expect no changes in the ECB monetary policy statement, but pricing in the bond market shows the euro is benefiting from safe-haven rotation.

Buy, Sell, Hold Verdict on EUR/USD

Buy: Above 1.1785 with target toward 1.1830, contingent on DXY holding below 97.00
Hold: Between 1.1720–1.1775, awaiting FVG reaction
Sell: Only below 1.1700, invalidating bullish structure, target 1.1650

With the Fed’s credibility in flux, the euro rising on structural data, and risk sentiment swinging positive, EUR/USD holds a firm bullish bias unless the macro narrative breaks sharply. All eyes remain on Powell’s tone, the DXY's 97 handle, and whether bulls can claim 1.1830 and extend to 1.1900 before fresh resistance emerges.

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