My EUR/USD Scenario

My outlook for EUR/USD is the inverse of my DXY view. In the short term, I expect the pair to remain under pressure, with the dollar potentially benefiting from relatively higher US yields, interest-rate differentials, and continued demand for USD liquidity.

However, my long-term outlook is more constructive on the euro. Over a multi-year horizon, persistent US fiscal deficits, rising government debt, and a gradual erosion of the dollar’s relative advantage could create a structural headwind for the USD. If this plays out, EUR/USD could eventually transition into a broader long-term uptrend.

Therefore, my base case is short-term weakness followed by long-term strength in EUR/USD. I am not expecting the transition to be linear; the pair could experience significant counter-trend rallies and corrections along the way.

In short: I see EUR/USD lower before I see it structurally higher.

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@RezaMacroEdge