Alpha Report
EUR/USD | 2023–2026

1. Executive Summary

Signal Coverage — EUR/USD

6E Macro Review

2023: The EUR/USD futures contract staged a meaningful recovery through much of 2023, building on the late-2022 rebound from parity lows, as the ECB pursued one of its most aggressive tightening cycles in its history while the Fed's own hiking pace began to decelerate and eventually pause. Geopolitically, the ongoing Russia-Ukraine war continued to weigh on European energy security and growth sentiment, though the acute energy shock of 2022 had moderated, reducing the most extreme tail-risk premium embedded in the euro. Analysts broadly viewed the move off parity as a regime normalization rather than a structural reversal, with most noting that the pair remained well within a historically wide range and had not reclaimed levels that would signal a durable euro bull regime.

2024: EUR/USD futures came under renewed and sustained pressure through 2024 as the policy divergence narrative reasserted itself: the ECB pivoted to rate cuts earlier and more aggressively than the Fed, which maintained a higher-for-longer posture before executing only modest easing late in the year. The U.S. presidential election in November introduced significant geopolitical repricing, with expectations of tariff escalation, fiscal expansion, and a stronger dollar driving the pair toward the lower end of its multi-year range and raising fresh questions about whether parity could again be tested. Analysts began debating a potential regime shift toward sustained dollar dominance, though most stopped short of calling a structural break, citing eurozone current account surpluses and positioning extremes as counterweights.

2025: EUR/USD futures experienced elevated volatility in 2025 as the pair tested and briefly breached parity in the early part of the year, driven by the implementation of broad U.S. tariffs on European goods, a deteriorating eurozone growth outlook, and escalating trade tensions that functionally acted as both a geopolitical and economic shock to the bloc. The ECB continued cutting interest rates in response to slowing inflation and weak economic activity, while the Federal Reserve eased more gradually, preserving a meaningful interest-rate advantage for the dollar. By mid-to-late 2025, however, markets began to stabilize as trade negotiations showed intermittent signs of progress and expectations grew that the ECB was approaching the end of its easing cycle. Analysts remained divided over whether the euro's weakness represented a temporary policy-driven dislocation or the beginning of a longer structural period of dollar dominance. While some argued that valuation metrics and improving external balances favored an eventual euro recovery, others maintained that persistent growth differentials and ongoing geopolitical uncertainty would continue to cap upside in the common currency. Overall, 2025 produced a trend-rich environment characterized by sustained macro narratives and well-defined directional moves.

2026 (YTD through Q2): The first half of 2026 has been characterized by a more balanced and less directional macro environment, as investors reassessed both the pace of Federal Reserve easing and the extent to which the ECB could continue supporting growth without reigniting inflationary pressures. The immediate impact of earlier trade policy shocks began to fade, shifting market attention toward incoming economic data, fiscal developments, and the evolving outlook for global growth. While periodic risk-off episodes provided temporary support for the U.S. dollar, improving eurozone activity indicators at times offset those flows, resulting in a market that oscillated between competing narratives rather than following a sustained trend. Analysts increasingly described EUR/USD as entering a consolidation phase after several years dominated by monetary policy divergence, with relative growth expectations, trade negotiations, and geopolitical developments becoming more important drivers of short-term price action. Consequently, 6E exhibited more frequent reversals and shorter-lived trends than those observed throughout much of 2024 and 2025.

Signal Performance Overview

2023: The signal demonstrated consistent directional alignment with euro futures throughout the year, maintaining win rates above 55% across all four quarters and generating its strongest quarterly return in Q1. Drawdowns remained well-contained, never breaching -1.16%, suggesting the strategy navigated both trending and mean-reverting regimes in 6E without significant adverse exposure. The Sharpe progression was notably steady, reflecting a favorable risk-adjusted environment as the euro consolidated its post-2022 recovery.

2024: Performance was more uneven, with a strong first half (particularly Q1, which posted the highest quarterly Sharpe of the year) giving way to a deteriorating second half as Q4 turned sharply negative and dragged the annual figures lower. The Q4 drawdown of -1.87% was the deepest single-quarter drawdown of the entire backtest period outside of 2026, likely coinciding with the dollar's late-year resurgence and choppy, trend-resistant price action in the euro. Win rates held reasonably well above 50% even in the losing quarter, indicating the losses were driven more by adverse move magnitude than signal misdirection.

2025: This was the strongest full-year period in the backtest, with the signal firing with notable consistency across all four quarters and win rates remaining elevated well above 54% throughout. Drawdowns were exceptionally shallow relative to the returns generated, with no quarter breaching -1.02%, pointing to a regime where euro trends were both persistent and orderly enough for the strategy to compound gains efficiently. The risk-adjusted profile improved sequentially from Q4 2024, suggesting the signal recalibrated well to shifting macro dynamics, likely benefiting from clearer ECB-Fed policy divergence driving sustained directional moves in 6E.

2026 (YTD through Q2): The first half of 2026 marked the weakest period of the validation sample for the signal, with gains generated in a constructive Q1 largely erased by a difficult second quarter. Although Q1 maintained the positive momentum established during 2025, Q2 produced the lowest risk-adjusted performance of the entire backtest, driving the year-to-date results into negative territory. Win rates remained close to 50% during the weaker quarter, indicating that the deterioration stemmed less from a collapse in directional accuracy than from an unfavorable balance between winning and losing trades as market reversals became more frequent. Drawdowns also reached their deepest level of the sample, reflecting a macro environment in which shorter-lived trends and rapid shifts in sentiment reduced the effectiveness of the model's momentum-driven approach. Despite the disappointing return profile, the relatively stable win rate suggests the underlying signal retained predictive value but faced a significantly less favorable trading regime than the persistent trend conditions that supported its strong performance throughout 2025.

2. Trading Strategy

In order to produce the metrics below we use the signal in combination with the trading strategy below:

• Leverage: No leverage is applied for this strategy and metrics
• Positions:
  • Entry positions: Every 5 minutes (between 09:45 and 14:00 ET) we decide to take a long, short or no position using 1/51 of our starting portfolio for the day (there are 51 possible openings per day). Each long/short position is then split into 5 parts and executed on each minute for the next 5 minutes following the decision. There is no sizing adjustment.
  • Exit positions: We exit all positions at the end of the day. The exits are split over five minutes (15:55–16:00 ET).
• Costs: 1 bp round-turn assumption. Extra exchange/clearing fees not included.
• Contract series & roll: Front-month continuous. Switch at the open T–5 trading days before expiration; stop trading the expiring contract and start trading the next.

For detailed examples, flowcharts, and a full walkthrough of the trading strategy, see Benchmark Trading Strategy.

3. Model Training Data and Timeframe

4. Performance Metrics

Table 1: Quarterly and Annual Metrics

5. Next Steps

Download historical predictions using the Client API and confirm performance in your own test harness.

• Sign-up: Start Free Trial
• API Documentation: https://quantumsignals.ai/documentation

6. Contact

Please reach out with any questions or comments at: info[at]quantumsignals.ai