RBC has a cautious outlook for the EUR/USD, predicting it will end at 1.14 by the end of Q2 and rise slightly to 1.15 by the end of Q3. This conservative view differs from the broader market, which expects a more aggressive increase. The rally of EUR/USD this year has been fueled by fiscal news from Germany in March, a tariff announcement in April, and a shift in market positions from net short to net long in EUR/USD, supported by options demand. RBC believes the current tariff situation will remain stable, noting that any changes could impact their forecasts. Without new developments, EUR/USD is expected to stabilize rather than breakout. Both the ECB and the Fed are maintaining their current policies, which reduces the chances for further Euro strength. European ETF inflows have slowed, and sentiment in the Eurozone, along with manufacturing indices, is around neutral, showing a lack of strong macroeconomic support. RBC is tempering expectations for EUR/USD. With fading catalysts, neutral economic data, and stable policies on both sides of the Atlantic, a stable range seems more likely than a breakout in the coming months. So far, the data suggests that the Euro’s rise against the Dollar may be losing momentum—for now. RBC’s cautious stance contrasts with some market participants who hope for a significant rise in the short term. Their view is understandable but based more on specific events rather than strong economic growth in the Eurozone. Key events contributing to the rally include a budget announcement in Berlin, changes in trade conditions, and shifts in speculative positions, all of which are now mostly factored in. In short, RBC sees the pair in a sort of waiting period—moving slowly within a range, caught between supportive fiscal actions and a stable global monetary policy that brings few surprises. The rate paths for both the Fed and the ECB are behaving predictably, limiting chances for sharp moves. Most sources of big fluctuations—especially significant rate differences—have been neutralized. Morgan pointed out that economic momentum in the Eurozone remains weak. While it’s not getting worse, it doesn’t convincingly boost demand for Euros either. With ETF inflows slowing down, there’s less buying pressure from passive investors, leaving speculative accounts to drive most directional bets. These accounts tend to react to daily signals like forward guidance, yield spreads, or option skews. Tariff policy hasn’t changed, and unless something concrete arises, it’s expected to stay the same. The outlook is static. Any change in tariffs could open new opportunities for movement, especially in options, but that’s not in the base case for now. We’ll watch closely but will only act when momentum builds in a confirmed way. Regarding positioning, we see the upper limit of the current EUR/USD range as more of a guideline than a breakout point. For traders with options exposure, this is a time to focus on premium decay and keep straddle strategies close to the market price. With low vega, there’s an opportunity to manage theta aggressively, but without chasing every tiny movement. Spot changes may offer quick chances, but expecting them to continue without fresh news or clear economic data may leave potential gains unclaimed. Powell’s consistent approach and Lagarde’s careful comments indicate little immediate catalyst from central bank communications. Traders should remain flexible rather than heavily favoring one side, while also watching for any shifts in hedging flows that may signal underlying pressure. The preferred strategy is tactical. Don’t overcommit to one side, but seek short-term momentum plays near the edges of the range. If volatility rises unexpectedly—maybe due to surprise US data—it could lead to more complex strategies. Until then, it’s wise to focus on time decay and take what the market provides, rather than forcing trades without clear direction.

here to set up a live account on VT Markets now