EUR/USD Market Outlook Update: Key Risk Events Could Determine the Next Leg

Lamera Capital

2025-07-22

EUR/USD is on a knife edge this week, and the team at Lamera have been monitoring the pair closely. While we initially expected a pullback, the recent price action and sentiment suggest a more complex picture.

There is still a small chance of a short-term dip, which would offer a tactical window for USD sellers, but this would likely only materialise if:

An EU–US trade deal fails to materialise by August 1st, increasing tariff fears.
Lagarde strikes a clearly dovish tone at the ECB press conference on Thursday, downplaying inflation concerns or signalling more rate cuts.

What’s Changed?

The euro continues to gain traction, and bullish sentiment is now dominant.
The pair has held above 1.1650 and is now pushing toward the 1.1700-1.1735 resistance band
Tariff concerns remain a wildcard, but recent ECB commentary and corporate inflows suggest confidence in the eurozone economy.

Strategic Insight: Longer-Term Picture Remains Bullish

Overall euro sentiment is bullish, and the ECB is nearing the end of its rate-cutting cycle, while the Fed hasn’t started cutting yet.

This interest rate divergence supports a continued upward trend in EUR/USD over the long term.

We’ve been in discussion with economists at UBS who now forecast the pair moving toward 1.22 in the coming months.

Another sticking point is that markets have already priced in one final cut from the ECB this year, this reaffirms the euro’s underlying strength.

Levels to Watch

Immediate Resistance: 1.1710 - 1.1735 (July highs and trendline resistance)

Support Zone: 1.1550 - 1.1580 (prior breakout area)

Bullish Breakout Confirmation: Close above 1.1735 on daily chart

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