EURUSD: BUY 1.1190, SL 1.1140, TP 1.1260 | 16 May 2025

Event to watch out for today:

15:30 EET. USD - Initial Jobless Claims

EURUSD:

EUR/USD is holding near 1.1200 in Thursday's Asian session, recovering the day's losses as the euro (EUR) gains momentum ahead of the preliminary Eurozone gross domestic product (GDP) report for Q1 2025 to be released later in the day.

The euro is being bolstered by growing confidence in its role as a reserve currency. Analysts at Capital Economics noted that the single currency is now in its strongest position in years and is closing the gap with the US dollar (USD) in global reserves. This shift is partly due to the policies of US President Donald Trump, which are seen as undermining the traditional appeal of the USD as a “safe-haven currency”. Further boosting the euro's reserve status was Germany's move to loosen fiscal restraints to boost defense and government spending, sparking additional demand for the currency.

Meanwhile, European Central Bank (ECB) officials continue to emphasize the need for further interest rate cuts amid growing confidence that U.S. tariff measures will not significantly boost inflation in the eurozone. While interest rate cuts usually have a negative impact on the euro, the currency has so far remained resilient.

EUR/USD is also finding support from a softer US Dollar as markets remain cautious amid continued, albeit slightly diminished, trade uncertainty. Attention now turns to upcoming US data releases, including retail sales and the Producer Price Index (PPI).

Adding to the broader context, speculation is growing that Washington may favor a weaker dollar to boost its trade competitiveness. The Trump administration has argued that an overvalued dollar puts U.S. exporters at a disadvantage against competitors with weaker currencies.

Trading recommendation: BUY 1.1190, SL 1.1140, TP 1.1260

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