The EUR/USD pair traded modestly lower on Friday, dipping to around 1.1430 at the time of writing after touching 1.1500 the previous day. Thursday’s session was dominated by a stronger euro, supported by a hawkish tone from the European Central Bank (ECB), even as the ECB cut rates by 25 basis points, bringing the key deposit rate to 2.0%. The policy move was widely anticipated, but ECB President Christine Lagarde’s stern remarks about the limited scope for further easing gave the euro a notable lift.
Lagarde emphasized that the rate cut does not mark the beginning of a broader easing cycle, suggesting the ECB may now pause rate changes, contingent on future inflation and economic data. This hawkish pivot led to a rally in both the euro and German Bunds, signaling that investor expectations for additional near-term cuts have diminished.
US Dollar Weakens, But Investors Stay Guarded
Meanwhile, the US dollar remained under pressure this week, dragged down by soft macroeconomic indicators and geopolitical uncertainty. The lack of progress in trade discussions between President Donald Trump and Chinese President Xi Jinping has added to the risk-off sentiment, although Trump’s vaguely optimistic tone has provided some temporary support to market confidence.
Still, traders turned cautious ahead of the May US Non-Farm Payrolls (NFP) report, due for release later on Friday. The outcome of the jobs data could significantly influence Federal Reserve policy expectations, particularly in light of growing speculation about a potential rate cut in July.
Technical Outlook: Key Support at 1.1400
Technically, EUR/USD remains in a bullish trend, characterized by a series of higher highs and higher lows since mid-May, as seen on the 4-hour chart. However, the rally stalled at the psychological resistance of 1.1500, and the pair has since pulled back modestly.
Immediate support lies at 1.1400, near a rising trendline and a key round number level. A break below this could weaken the bullish structure.
Next supports are located at 1.1360 and 1.1315, both of which have functioned as pivot zones since mid-April.
On the upside, the 1.1495 level remains near-term resistance. A break above this could target the 261.8% Fibonacci extension near 1.1585.
Conclusion
Despite a short-term pullback, EUR/USD maintains a constructive technical setup, supported by hawkish ECB messaging and a weaker US dollar. However, the 1.1400 support level is now critical. A strong US NFP report could challenge the euro’s advance, while a softer-than-expected release may push the pair toward retesting and possibly breaking above 1.1500.
Investors are advised to watch the US jobs data closely, as it may serve as a decisive catalyst for the next leg in EUR/USD’s price action.
