EUR/USD Outlook: price may continue to rise while above this level

Nearing the end of the Rate Cut Cycle

At the latest European Central Bank meeting, President Christine Lagarde described interest rates as “less restrictive,” signaling that Governing Council members are open to slowing the pace of rate cuts. Despite this, policymakers considered that the Bank’s neutral interest rate target might be below 2.5%—likely in the range of 1.75% to 2.25%—to mitigate potential economic downturns in Europe, particularly in response to the tariffs President Trump plans to impose on European goods.

ECB forecasts project economic growth of 0.9% in 2025 and 1.2% in 2026, with inflation expected at 2.3% in 2025 and 1.9% in 2026.

Key Drivers of the Euro’s Current Trend

The euro received a boost after German politicians moved closer to an agreement on increasing defense spending, proposing a €500 billion infrastructure and defense fund. This initiative comes amid signals from the Trump administration that the U.S. may reduce its defense commitments in Europe. Notably, Elon Musk, Trump’s chief of Department of Government Efficiency, even suggested a full U.S. withdrawal from NATO.

This shift could encourage more European governments to follow Germany’s lead by raising defense budgets, potentially driving higher economic growth. As a result, the ECB may face less pressure to support the economy through aggressive rate cuts. Consequently, the euro’s trajectory could increasingly be influenced by fiscal policies across European nations, alongside ECB monetary policy.

EUR/USD Price hits a Multi-Month High

On March 11, the euro strengthened against the dollar, reaching its highest level since the first week of October last year. The Relative Strength Index surpassed 70, signaling strong bullish momentum. Right now, prices are testing the lower end of the current trading zone set between 1.0885 and 1.1060.

A daily close below the low end of this zone could indicate a potential decline toward 1.0762. Additionally, a drop in the RSI below 70 would suggest a weakening upward momentum, signaling a possible downturn in the EUR/USD pair.

Key Levels in the Opposite Scenario

Sustained trading above the low end of the current trading zone suggests a continuation of the upward trend, possibly sending the price for a test of the high end of the zone at 1.1060. A daily close above this level would confirm bullish momentum, potentially driving prices even higher toward 1.1176. That said, the resistance level at 1.1110 should be kept in focus.

EUR/USD price – Daily Chart

Chart Source: ADSS Platform