Title: EUR/USD Bulls Regain Control, Eyes Set on Higher Targets
Original Analysis by Ross J Burland | Sourced from FXStreet
Overview
The EUR/USD pair has shown renewed bullish momentum as trading enters the day, following a series of consolidations and minor pullbacks that failed to disrupt the upward trajectory. The broader macroeconomic environment, primarily governed by U.S. Dollar fluctuations and central bank commentary, continues to shape the market direction for this popular currency pair.
As bulls take the driver’s seat, price action suggests further upside potential with technical and fundamental indicators aligning to support the possibility of a sustained rally. In this extended breakdown, we analyze the latest market dynamics, macroeconomic backdrop, technical setups, and potential price targets through both short-term and longer-term lenses.
Macroeconomic Fundamentals Driving EUR/USD
The EUR/USD movement reflects underlying economic indicators, monetary policy expectations, and risk sentiment. Several key macroeconomic influences are currently guiding the pair’s bullish stance:
– Dovish Tone from the Federal Reserve:
– Recent U.S. data continues to show cooling inflation and slightly weakening labor market conditions.
– This has signaled to markets that the Federal Reserve may not commit to extended monetary tightening.
– Dovish commentary from Fed officials implies lower or steady interest rates, pressuring the U.S. Dollar.
– Mixed Eurozone Economic Readings:
– While the Eurozone economy remains in a fragile recovery mode, core inflation remains persistent.
– Signs of resilience in Germany, the bloc’s economic powerhouse, and modest upticks in services PMI offer support to the euro.
– The European Central Bank maintains a cautiously optimistic tone, expecting gradual recovery without further aggressive rate hikes.
– Shifting Risk Sentiment:
– Global financial markets are displaying appetite for risk, with equities trending higher and demand for the safe-haven Dollar diminishing.
– This risk-on environment contributes to the euro’s strength against the Dollar as investors look for yield and capital appreciation opportunities.
Technical Analysis
From a technical perspective, the EUR/USD is displaying a classic bullish breakout pattern. Price action, momentum indicators, and support levels point to a probable continuation of the uptrend.
Daily Chart Observations:
– The pair broke above a descending trendline, which had previously acted as a resistance barrier for weeks.
– The break has been confirmed with multiple sessions closing above this trendline, signaling a shift in market sentiment.
Key Support and Resistance Levels:
– Immediate support is observed at:
– 1.0830: A previously tested demand zone where buyers re-entered the market.
– 1.0800: Psychological round number and technical support zone.
– 1.0760: Near the 21-day EMA, acting as dynamic support.
– Immediate resistance is found at:
– 1.0925: Previous swing high.
– 1.0960–1.0985 zone: Multi-session resistance and upcoming target range.
– 1.1000: A major psychological level which could trigger profit-taking or increased momentum buying if broken.
Momentum Indicators:
– RSI (Relative Strength Index) on the daily chart has moved past the 60 level but remains below the overbought zone, suggesting room for further gains.
– MACD (Moving Average Convergence Divergence) is showing bullish crossover signals, confirming the upward momentum.
– Daily 21-, 50-, and 100-day exponential moving averages are aligning in a bullish configuration, further supporting the uptrend.
Short-Term Outlook
Over shorter time frames, such as the 4-hour chart, EUR/USD highlights a clear series of higher highs and higher lows, a sign of continued bullish structure.
Intraday Trade Analysis:
– Bullish Momentum Continues:
– The pair has maintained strength above 1.0850 during the European session, indicating that buyers remain in control as U.S. traders prepare to enter later in the day.
– Volume analysis shows a rise
Explore this further here: USD/JPY trading.