FX.co ★ Crude | EUR/USD

Although the EUR/USD pair has declined for 17 consecutive days, with one-day drops as high as 440 pips, it remains under significant downward pressure, primarily due to strong market demand for the US dollar. Much of this continued strength stems from the Federal Reserve's hawkish monetary policy stance, despite mixed signals from various Federal Open Market Committee (FOMC) policymakers and warnings from officials like New York Fed President John Williams against further premature tightening of monetary policy. While there is no set timetable for interest rate hikes, the market has actively priced in expectations of a rate increase, pushing EUR/USD valuations to extreme levels, as if the Fed had adopted a very hawkish policy framework. However, long-term macroeconomic realities—including the anticipated monetary easing around 2027, rising US Treasury yields that are putting significant pressure on the federal budget, slowing domestic economic growth, and renewed trade policy disputes during the Trump administration—essentially suggest that the dollar's strength lacks long-term structural support. Recent favorable economic winds have further highlighted the significant disconnect between price movements and underlying data. Friday's data provided a potential counterattack for euro bulls: US non-farm payrolls and labor market data came in well below expectations, while European inflation data also exceeded forecasts. However, this positive data failed to trigger any substantial market rally, resulting in only meager gains that couldn't even offset the previous day's losses. The technical picture also reflects this underlying weakness: the failed bullish 19 imbalance pattern has transformed into a bearish inverse imbalance pattern. This shift successfully generated a fresh sell signal, leaving market bulls structurally unable to withstand sustained selling pressure, as traders continued to buy the dollar despite macroeconomic contradictions. With the four-year overall trend remaining stuck in a range-bound environment for an extended period, the euro now faces a greater risk of falling below the key psychological level of $1.10. The European Central Bank’s hawkish policy, positive regional economic indicators, and disappointing domestic labor market reports have failed to halt the overall downward trend. While fundamentals have historically provided bulls with ample reason to react—especially given the significant shift in structural trade policy and geopolitical demand drivers since last year—market sentiment remains apathetic. Traders continue to be bullish on the US dollar, ignoring the clear limitations of the current monetary tightening cycle and the fact that future easing may come sooner than market prices reflect. As market participants turn their attention to the remainder of the week, all eyes are on incoming data, most notably the EU Producer Price Index (PPI) and the highly significant US ISM Services PMI. These reports will set market sentiment for the second half of the trading session, but the market remains highly skeptical that any data point can alter the prevailing downtrend. Unless fundamental sentiment shifts away from the dollar's blind accumulation, the technical picture is likely to continue favoring the formation of a new bearish market. Ultimately, while it cannot be concluded that the long-term uptrend has been permanently invalidated, euro buyers should exercise extreme caution regarding short-term prospects, as bearish momentum dominates the market in the short term.