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The euro has regained strength against the dollar, with EUR/USD holding steady at 1.1312 on Friday.

Key drivers behind EUR/USD’s movement

The US dollar remains vulnerable as investor concerns over the US fiscal outlook persist. President Donald Trump’s proposed budget bill – featuring tax cuts and heightened defence spending – has stoked fears of surging national debt.

According to the Congressional Budget Office, the bill could inflate the US national debt by nearly $4 trillion, raising alarms over long-term fiscal stability.

Further pressuring the dollar, Moody’s recently downgraded the US credit rating from Aaa to Aa1, citing widening budget deficits and rising debt-servicing costs.

Meanwhile, investor appetite for US assets has waned amid sluggish progress in trade negotiations.

Although this week saw limited high-impact US data releases, the market has welcomed the brief lull. Today, traders will focus on April’s new home sales report for fresh directional cues.

Technical analysis: EUR/USD

H4 Chart:

(Click on image to enlarge)

EUR/USD dipped to 1.1255 before correcting to 1.1311, with a consolidation range nearing completion. We anticipate a downward expansion towards 1.1120, supported by the MACD indicator, whose signal line has exited the histogram zone and points decisively downward.

H1 Chart:

(Click on image to enlarge)

The pair is forming a downward impulse structure, followed by a correction to 1.1311. Today, a renewed decline towards 1.1240 appears likely. A break below this level could extend the downtrend to 1.1170. This scenario is corroborated by the Stochastic oscillator, with its signal line hovering above 80, poised to drop towards 20.
 

Conclusion

With the dollar weighed down by fiscal concerns and a credit rating downgrade, EUR/USD may extend its gains. Traders should monitor today’s US housing data for further momentum.

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