EUR/USD has extended its gains, rising from 1.0125 on February 3 to a high of 1.0514 last week, with non-speculative flows driving the rally. Short positioning remains substantial, with net shorts only slightly decreasing from $8.6 billion to $8.3 billion, suggesting that additional short covering could fuel further upside. Non-speculative demand tends to have a more sustained impact, reinforcing the potential for a longer-term shift higher. The recent decline in USD demand has been driven by weaker U.S. retail sales, softer PCE inflation expectations, and diminishing trade tariff risks, all of which have put the dollar on the back foot.

Technically, EUR/USD maintains a bullish structure, with key resistance at 1.0550 and further upside potential toward 1.0600 and 1.0650. Support lies at 1.0450 and 1.0380, with a break below potentially exposing 1.0300. The options market suggests traders are reducing demand for USD call options, further supporting a continued rally in EUR/USD. With FX volatility risk premiums falling, the environment favors further strength in the pair.

Looking ahead, macroeconomic factors remain aligned in favor of euro strength. The Fed’s policy outlook is becoming increasingly dovish, while global risk sentiment is improving amid hopes for a ceasefire in Ukraine. Additionally, the perception that trade tariffs are a negotiating tool rather than an imminent economic threat has further dampened USD demand. As long as EUR/USD holds above 1.0450, the near-term outlook remains bullish, with potential for a move toward the 1.06-1.07 range.