Euro Struggles to Advance Amid Growth Concerns

Key Takeaways:

*Eurozone growth remains weak with soft GDP and industrial data.

*Gains mainly from USD softness, not Eurozone strength.

*ECB cautious as sticky inflation meets fragile economic backdrop.

Market Summary:

The euro traded in a tight range as modest dollar weakness was offset by lingering concerns over Eurozone growth momentum. Q2 GDP rose just 0.1% QoQ, while industrial production fell 1.3% in June, with Germany and Italy posting the steepest declines. This underscores the fragility of the recovery, leaving the European Central Bank (ECB) in a policy bind—core inflation remains elevated at 3.7% YoY, but wage growth of 4.5% and sluggish output complicate any move toward aggressive easing.

Recent euro gains have largely reflected U.S. dollar weakness rather than homegrown strength. The hotter U.S. PPI print temporarily bolstered the greenback, but with September Fed cut expectations still anchored at 25 bps, EUR/USD has held above key support at 1.1650. Traders now look to Eurozone CPI revisions and the ECB minutes for clarity on the central bank’s stance, especially in light of persistent service-sector inflation.

Externally, risk sentiment has improved amid tentative geopolitical de-escalation, lending some support to the euro. However, tariff risks, energy market volatility, and the bloc’s heavy reliance on global trade continue to pose headwinds. Without a clear growth catalyst or decisive ECB policy pivot, the euro’s upside appears limited compared to sterling, particularly if incoming U.S. data fails to sustain dollar weakness.

Technical Analysis

EURUSD, H4

EUR/USD is trading near 1.1650 after pulling back from recent highs, with price hovering just above the 200-period moving average at 1.1640. The pair has so far held above the 1.1585 support, but upside momentum is showing signs of slowing as it consolidates below the 1.1690 resistance level. A decisive move above this resistance would open the way toward 1.1750, while a break below 1.1585 could trigger a deeper retracement toward 1.1400.

From a momentum standpoint, the Relative Strength Index (RSI) is at 48, showing a neutral stance and indicating the market is neither overbought nor oversold. The MACD is close to the zero line but leaning slightly bearish, with its histogram showing a small negative reading and the signal line edging lower. This suggests buying pressure is weakening, though no strong selling trend has yet emerged.

Volume has tapered off compared to earlier spikes, reflecting a period of indecision as traders await a clearer breakout direction. In the short term, holding above the 1.1585 level is crucial for bulls to maintain control, while sellers will look for a break below that threshold to extend the downside.

Resistance levels: 1.1750, 1.1880
Support levels: 1.1585, 1.1400