Euro to Dollar Forecast: 1.130 Level "Remains Anchor in EUR/USD"

May 6, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: 1.130 Level "Remains Anchor in EUR/USD"

The Euro to Dollar exchange rate (EUR/USD) has found support below 1.1300 and is trading around 1.1320, but rallies have met selling interest.

The Euro was hampered by German CDU leader Merz failing to win a vote in the Bundestag that would have approved him as Chancellor. Another vote may be held in the short term.

EUR/USD is still trading above levels that would be justified by interest rates alone and a key question is whether the dollar discount is justified.

US data, tariff developments and Asian currency-market dynamics will remain extremely important in the short term.

High-profile US data has not suggested any notable deterioration in the economy at this stage, but data is lagging and indicators such as freight transport suggest that major stresses could be on the horizon.

ING commented; “The dislocation between FX and short-term rate differentials however doesn’t tend to last too long, and in this case would need to be fuelled by further unwinding of USD reserve positions.

It added; “If that doesn’t happen, the overbought and overvalued EUR remains at risk of more downside pressure. The 1.130 level remains the anchor in EUR/USD – a decisive break lower can see the 1.120 support being cleared soon.”


Danske Bank still sees net dollar selling; "With markets arguably having priced in some degree of slowdown, the next leg lower in the USD is likely to unfold more gradually, barring a fresh policy shock. We remain tactically inclined to buy EUR/USD on dips and maintain our structural bearish USD view."

According to Scotiabank; “EURUSD continues to trade within its mid-1.12/upper-1.15 range from early April. We look to near-term support below 1.13 and resistance above 1.14.

Tuesday’s Asian session was more subdued after wild Taiwan dollar gains on Friday and Monday.

National Australia Bank strategist Rodrigo Catril commented; “A bit of calmness before another leg in the trade storm. Forex markets, especially Asia forex markets, are taking a breather as we wait for new US trade information.”

The sharp Taiwan dollar gains have, however, sparked further speculation of wider Asian currency gains and a weaker dollar in global markets.

According to Chris Weston, head of research at Pepperstone; "the factor many talk about is whether these countries with historically 'weak' and heavily managed currencies are now appealing to Trump through the currency channels and are now allowing for an appreciation of the currency as part of the trade negotiations."

MUFG noted the potential for shifts in asset allocations; “Asian markets also have been over time increasing their exposure towards US assets. To the extent that trade positions with the US changes more fundamentally, there could also be a more fundamental rebalancing, even if not repatriating back home, certainly some rebalancing towards other global assets might be reasonable.”


Danske Bank considers that the dollar is still vulnerable; "Despite the USD stabilizing over the past week - supported by a rebound in US equities, better-than-expected US figures and signs that the Trump administration is stepping back from its most aggressive tariff threats - there still appears to be a negative risk premium embedded in the greenback."

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TAGS: Euro Dollar Forecasts