The euro is showing unexpected resilience despite the fundamental advantage still favoring the U.S. dollar. The Fed's policy rate stands at 3.75% compared with 2.40% for the ECB, the U.S. economy continues to deliver relatively strong results, and markets are still considering the possibility of further Fed tightening.
Meanwhile, after raising rates from 2.15% to 2.40%, the ECB has already paused, avoiding a rush toward further tightening amid weak economic growth and concerns over European competitiveness.
So why is EURUSD rising? The market trades not only the current interest rate differential but also future expectations. A significant part of the Fed's hawkish scenario may already be priced into the dollar, while the decline in oil prices and the geopolitical risk premium is reducing concerns about another acceleration in inflation.
Technically, the recovery above 1.145 created a bear trap. The key level for buyers is now 1.157: a sustained breakout above it would confirm a stronger bullish scenario. For the U.S. dollar to regain control, EURUSD would need to move back below 1.145 and establish itself there.