Euro Rises as US Dollar Comes Under Pressure Amid Budget Deficit Concerns

Key drivers affecting EUR/USD

The US dollar came under sustained pressure in the previous session, driven by growing concerns over the widening US debt and budget deficit. These fears were exacerbated by a warning from Moody’s of a potential downgrade to the US credit rating.

Fiscal risks intensified following the House Budget Committee’s approval of President Donald Trump’s fiscal bill, which could add trillions of dollars to the deficit over the next decade. Despite criticism, the administration maintains that tax cuts will spur economic growth, boost revenues, and ultimately reduce the deficit.

Meanwhile, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, reiterated expectations of a single rate cut this year, citing ongoing uncertainty arising from trade tariffs.

Today, market attention turns to the Eurozone’s preliminary consumer confidence index for May. No major US economic releases are scheduled.

Technical analysis: EUR/USD

H4 Chart:

The EUR/USD pair continues to consolidate around 1.1212, with the potential for an upward move towards 1.1300 (testing from below). The current uptrend is a corrective phase following the most recent decline. Once this correction concludes, a new downward wave may emerge, targeting 1.1029 as the initial objective. This outlook is supported by the MACD indicator, with its signal line remaining above zero and trending upwards.

H1 Chart:

The pair is forming a fifth-wave structure within the correction towards 1.1300. Traders should monitor whether this level is reached today. A resumption of the downtrend may follow, with 1.1166 as the next key level. The Stochastic oscillator supports this scenario, with its signal line above 50 and ascending towards 80.

Conclusion

The EUR/USD pair’s latest rally reflects dollar weakness prompted by fiscal concerns, while technical indicators suggest a potential reversal once the current correction has played out. With no major US releases, traders will look to Eurozone sentiment for further direction.

Disclaimer

Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.