Euro's Surge: A New Cycle of Strength Against the US Dollar?

The recovery of the euro against the US dollar has been remarkable, with the pair benefiting from expectations that interest rates in the US will start to be reduced at a faster pace.

Nevertheless, the behavior of US yields and equities is also supporting a weakness of the dollar, which could begin transitioning into a new cycle.

Technical Analysis

When we look at the chart of the dollar index, we can see that the upward trend has clearly slowed down in recent times, with the index approaching the levels seen in November 2023.

USDIDX Daily Time Frame chart. Source: xStation 5

EUR/USD, daily time frame chart. Source: xStation 5

On the other hand, when we analyze the EUR/USD chart, we can see that the price has broken through an important technical zone—marked by the downward trend line that has been in place since July 2023.
Given the current context, it seems that the euro could appreciate even further against the US dollar, especially if it continues to trade above the recently broken trend line.

Currency Strength Chart. Source: Currencystrength.com

Henrique Tomé,
Senior Analyst at XTB Portugal

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