EUR/USD Outlook: Euro Extends Gains After Fed Comments

• The EUR/USD outlook shows the euro extending Friday’s gains.

• Fed’s Chris Waller said he was okay with a July rate cut.

• Traders are expecting the ECB to pause this week.

The EUR/USD outlook indicates that the euro is likely to extend its gains from Friday, as the dollar pauses its rally. The decline came after comments from the Fed revealed that some policymakers are open to a rate cut in July. However, the overall outlook has shifted since last week’s upbeat inflation figures. 

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The dollar gained last week due to a decline in Fed rate cut bets amid upbeat US data. However, on Friday, Fed’s Chris Waller said he was okay with a July rate cut since tariffs will likely have a small impact on inflation. This briefly weakened the dollar on Friday. However, most policymakers, including Powell, will likely maintain a cautious outlook for the future. 

Market participants expect higher tariffs to take effect starting August 1. Such an outcome would exacerbate the impact on inflation, leading to further delays in rate cuts. However, Trump continued his criticism of Powell last week. The US president is calling for lower interest rates. Meanwhile, conditions do not appear favorable for the Fed to lower borrowing rates significantly this year. 

Meanwhile, traders are expecting the ECB to pause again at a meeting this week. The central bank has met most of its objectives, allowing it time to catch its breath. However, the risk of higher tariffs could change that.

EUR/USD key events today

Market participants do not expect any key economic reports today. Therefore, the price will likely extend Friday’s move.

EUR/USD technical outlook: Bulls eye the 1.1800 resistance after SMA break

On the technical side, the EUR/USD price has broken above the 30-SMA, showing bulls have taken control. At the same time, the RSI has broken above 50, suggesting stronger bullish momentum. Sentiment shifted after the price met a solid support level comprising the 1.1600 key level and the 1.618 Fib retracement level.

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Initially, the price was on a downtrend that started at the 1.1800 key level. It traded below the 30-SMA, respecting it as resistance. At the same time, the RSI maintained its position below 50, supporting bearish momentum. However, bars failed to break below the 1.1600 support zone. 

As a result, bulls emerged and pushed the price above the SMA. If they maintain this new direction, EUR/USD will target the 1.1800 resistance. Otherwise, bears will retest the support zone.

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