Euro-Dollar Uptrend to Extend as Economic Sentiment Reaches Three-Year High

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Eurozone economic recovery driving currency gains as investors reduce U.S. overweight.

The euro’s broader uptrend remains intact even as EUR/USD eases to 1.1795 on Thursday, with recent price action confirming a series of progressively higher lows that underpin the constructive technical setup.

Last week’s low at 1.1742 stands well above January’s trough at 1.1572, which itself marked a clear improvement on November’s 1.1469 and August’s 1.1392, illustrating a steady upward shift in the market’s base.

Although the euro to dollar pairing briefly dipped below the 55-day moving average at 1.1774, it has not delivered a daily close beneath that level, reinforcing the view that underlying momentum remains positive.

Fundamentals are increasingly aligned with that technical structure: January’s eurozone economic sentiment reading rose to 99.3, the highest level in nearly three years, signalling that business and consumer confidence continue to recover.

“We expect sentiment to remain upbeat, reflecting stronger expected activity over the year in line with a modest acceleration in economic growth,” says Bert Colijn, Chief Economist for the Netherlands at ING.

Improving economic growth prospects in the Eurozone as investors look to diversify out of a heavy pro-U.S. asset allocation is boosting the euro.

Supporting the cyclical story, fresh data from the European Central Bank show lending to the private sector continued to expand at a modest pace of 3.3% year-on-year in January, while lending to households held steady at 3.0%.

“This stability suggests that household credit demand remains resilient, supported by ongoing housing market dynamics,” Colijn adds.

For market technicians, the pattern of higher lows suggests dips are still being bought within a broader rising channel.

Jeremy Boulton, a market analyst at Reuters, identifies successive upside levels at 1.1905, 1.2006, 1.2088, 1.2170, 1.2286 and 1.2434.

The euro’s ability to hold above its recent structural floor while economic sentiment improves strengthens the case that the recovery phase has further to run.

As long as incoming data continue to validate the narrative of modestly accelerating growth, the bias for EUR/USD remains tilted toward higher levels.