Euro Seen Rising Above 1.18 as Dollar Softens
The euro is poised to climb back above $1.18, UBS says, as the dollar softens and the single currency regains traction after months of choppy trading around the $1.16-$1.17 area.
That call matters because EUR/USD is the world’s most heavily traded currency pair and a move back through 1.18 would mark a break above the recent ceiling that has capped several rallies. A weaker dollar typically eases financial conditions globally, supports European importers and can tighten conditions for U.S. exporters and multinationals with overseas revenue.
Spot EUR/USD was holding near 1.16 on Wednesday, with the pair sitting close to its 50-day moving average and below the 1.17-1.18 band that has acted as resistance in recent sessions. Conventional technical indicators also point to a market that has cooled from earlier strength: the relative strength index is near neutral levels, while MACD readings show momentum improving but not yet decisive.
The euro’s latest rebound comes even as broader sentiment around the currency remains mixed. Adalytica’s Euro Trade Signals show neutral sentiment but elevated awareness, suggesting the pair is drawing more attention without a clear consensus on direction. The U.S. dollar, meanwhile, is coming off a softer stretch, reinforcing the case for a pullback in the greenback after a strong run earlier in the year.
Investors are watching whether the move is being driven by a lasting shift in rate expectations or simply short-covering ahead of the next batch of central bank and inflation data. A sustained break above 1.18 would likely invite fresh positioning into euro longs, while failure to clear that level could keep EUR/USD trapped in a narrow range.
The next catalyst is likely to come from the policy outlook on both sides of the Atlantic, with traders parsing European Central Bank and Federal Reserve guidance for any widening or narrowing in the rate gap.
| Entity | Gains | Losses |
|---|---|---|
| Euro bulls | ▲Higher EUR/USD | ▼Better entry levels fade |
| U.S. dollar bears | ▲Softer dollar trend | ▼Greenback gains traction |
| European exporters | ▲Stronger domestic demand narrative | ▼Less price competitiveness abroad |
| U.S. multinationals | ▲Weaker dollar tailwind | ▼Translation gains narrow |