EUR/USD: From Parity Panic to Safe Haven Surge

At the start of 2025, the consensus chatter was about EUR/USD revisiting parity. Fast forward to April and we’ve seen the euro rally almost 10% in a matter of weeks, blowing through resistance and triggering a rethink of its role in global markets.

Now we’re hearing serious talk of 1.20 as a base case, not a tail-risk upside.

Here’s what I’m watching — and why this shift matters.

From Cut to Climb: The ECB and a Stronger Euro?

This week’s ECB rate cut, expected to bring the deposit rate down to 2.25%, would mark the seventh reduction since June 2024.

On paper, that’s dovish — and should weigh on the euro. But the currency isn’t behaving like a classic rate-cut victim. In fact, EUR/USD just hit its highest levels since 2021, surging through 1.13 with no clear signs of slowing.

So what's going on?

Several overlapping factors are in play:

• U.S. tariffs and policy uncertainty are undermining the dollar’s haven appeal

• German fiscal easing and EU-level spending plans are structurally supporting the euro

• The ECB’s cuts are seen as pre-emptive, not panicked — reinforcing confidence rather than eroding it

• The market is heavily positioned long euro, but not yet at euphoria

And the banks are catching up to the move. Bank of America now sees EUR/USD heading to 1.20 in the coming months, citing investor sentiment and dollar weakness.

Societe Generale’s Kenneth Broux notes that increased European defence spending and the end of ECB easing are fundamentally reshaping the euro’s outlook.

Even ECB President Christine Lagarde acknowledged that the bank is “attentive” to the euro’s rapid rise, and won’t hesitate to lean against it if needed — but so far, there’s no panic from Frankfurt.

Daily Chart Movement EUR/USD

Chart Notes: The Bull Break Is Real

EUR/USD broke out of its 18-month range like it had something to prove. The pair rallied nearly 400 pips in two weeks, slicing through the 1.10 handle and holding above the 1.13 mark. Weekly closes are firm, and momentum is backed by volume.

Key technical zones I’m noting:

• Support: 1.1060 (former breakout level), then 1.0870

• Resistance: 1.1430, then the psychological 1.1500 and finally the stretch to 1.20

The structure here doesn't look exhausted — if anything, it's fresh. Traders caught leaning short are still being flushed.

Why the Euro's Narrative Has Changed

We’re seeing a rare shift where macro, flows, and sentiment are all moving together.

The euro is being recast — not just as a carry or funding currency, but as a credible alternative to the dollar in times of stress. That’s a big change. It doesn’t mean the euro is bulletproof. But it does mean the old assumptions (like "ECB dovish = sell euro") are less automatic than they used to be.

Bonds are now outperforming Treasuries, and the flow into euro-denominated assets is picking up. Even central bank reserve managers — usually a slow-moving herd — may be taking notice.

Strategic Takeaways

For traders, the key is not to get swept up in the hype but to understand the why. The euro is being supported by relative resilience, not booming growth. And while the path to 1.20 may be in play, it’s unlikely to be straight.

Here’s what I’d be thinking about in this environment:

• Don’t chase. Wait for retracements to structure entries

• Size accordingly. Volatility has surged — tighter stops and lighter positions may be warranted

• Watch positioning. CFTC and DTCC data are flashing long euro, but not yet crowded

• Stay data-sensitive. The ECB says they’re “meeting-by-meeting” — and so should you be

Final Thought: From Underdog to Anchor?

If you told most traders in January that we’d be talking about EUR/USD at 1.20 by spring, you’d have been laughed off the desk. Yet here we are — parity a distant memory, and the euro suddenly the adult in the room.

This is a market that’s still adjusting to what the euro now represents. Not just a currency, but potentially a safe haven alternative in a world where U.S. policy is unpredictable and Treasuries aren’t untouchable.

The question is: How far can a strong euro go before the ECB flinches? That’s the tension now.

EUR/USD Weekly Chart: The euro breaks out to three-year highs, defying dovish ECB expectations. Momentum shifts firmly bullish as the pair clears long-held resistance, with structural flows and dollar doubts fuelling the rally. Eyes now on 1.15–1.20 as the next major zone.

Disclaimer:  This post reflects my personal views and experience from over three decades in financial markets. It is shared for educational purposes only and is not financial advice. It does not promote any trades or guarantee outcomes. Always do your own research and manage your risk. Trading is high risk and not suitable for everyone. Choose regulated brokers, understand leverage, and never trade based on opinion alone. This is a market journal, not a signal service.

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