EUR/USD Surges Past 1.09: Traders Eye Key Resistance Amid Fed vs ECB Divergence
The EUR/USD pair (Euro/U.S. Dollar, traded on the Forex spot market) extended its rally on Tuesday, climbing as high as 1.0902 as traders reacted to contrasting signals from the Federal Reserve and the European Central Bank (ECB). With rising expectations that the Fed may delay interest rate cuts, while the ECB stands firm on a dovish stance, investors continue to reprice the outlook for both currencies.
Earlier in the session, ECB Governing Council member Fabio Panetta warned that the ECB must proceed “very carefully” with any further policy tightening. This dovish tone echoed last week’s statement from ECB President Christine Lagarde, who emphasized risks to the Eurozone economy and hinted at a slower pace of normalization. The market took Panetta’s comments as confirmation that European interest rates may have peaked, sparking renewed selling in the U.S. dollar.
Meanwhile, U.S. Treasury yields remained under pressure, with the 10-year note hovering near 4.10% after soft ISM manufacturing data on Monday. Although several Fed officials continue to project another hike this year, traders are increasingly betting that the Fed’s tightening cycle is done, especially after weaker-than-expected inflation and consumer sentiment data.
The divergence in monetary policy expectations between the Federal Reserve and the ECB has given the EUR/USD pair fresh momentum, with analysts noting that the pair may now attempt a sustained break above the 1.0920–1.0950 resistance zone—a level not seen since early July.
Technical analysts point to a series of higher lows on the daily chart, signaling a shift in market sentiment after last month’s dip below 1.08. Momentum indicators such as RSI and MACD have also flipped bullish, suggesting there’s more room for the euro to run in the near term.
However, traders remain cautious, with eyes on this Friday’s U.S. Non-Farm Payrolls report and next week’s U.S. CPI release, both of which could shift the narrative dramatically. Should either number surprise to the upside, it could reignite bets on another Fed hike, pulling the dollar back up and pressuring EUR/USD once again.
Still, for now, the euro appears to have regained its footing—and may be headed higher if upcoming data supports the dovish shift in U.S. policy expectations. The market’s attention is now laser-focused on the 1.0950 breakout, a level many view as the key to confirming a bullish reversal for the world’s most traded currency pair.
