EUR/USD Forecast: Limited Upside as Dollar Risks Build

EUR/USD forecast points to range-bound trading in the near term, with Commerzbank saying upside is limited as US Dollar risks build. Technically, EUR/USD is capped by recurring resistance levels during early 2025, while rallies face persistent selling pressure. Fundamentally, the ECB remains cautious on rates, and the Fed stays in a higher-for-longer posture due to stickier services inflation and tight labor conditions. This policy divergence keeps a yield differential that supports the Dollar, reducing the chance of a sustained Euro breakout. Traders may still see volatility around US data. Strong non-farm payrolls or CPI typically boosts the Dollar temporarily, but the report argues structural factors now matter more over a multi-year horizon. Commerzbank highlights longer-term Dollar vulnerabilities: elevated US fiscal deficits and ongoing Treasury issuance, gradual geopolitical reserve diversification away from the Dollar, and potential convergence in US vs Eurozone growth that could shrink the Dollar’s yield advantage. Positioning adds nuance. CFTC data shows speculators have reduced extreme long Dollar positions, though net positioning still favors the US currency. That suggests the immediate impact may be contained, while longer-term investors could slowly hedge Dollar exposure or add Euro-denominated assets. Bottom line: the EUR/USD forecast supports near-term consolidation with risk-off safe-haven flows favoring the Dollar, while longer-term structural pressures could slowly cap Dollar strength. Focus on Fed communication and incoming data for the next directional signal.