**EUR/USD Forecast: Euro Bulls Struggle to Retain Control**
*Adapted and expanded from an analysis by FXStreet.*
The EUR/USD currency pair witnessed heightened volatility during the past week, with Euro bulls making efforts to maintain their grip, only to encounter prominent resistance. The pair remains under pressure amid ongoing tensions involving central bank policy expectations, inflation data, and weak economic signals from the Eurozone. Meanwhile, the stronger performance of the U.S. dollar continues to limit the Euro’s gains.
Current price action suggests the EUR/USD pair is caught between conflicting market forces. On one hand, demand for the Euro persists in moments of broader dollar weakness, while on the other, hawkish signals from the Federal Reserve and resilient U.S. data continue to lift the greenback. Traders are closely watching future inflation numbers and upcoming rate decisions to get a better sense of the pair’s direction.
This expanded analysis takes a closer look at the technical landscape surrounding EUR/USD, economic influences on both sides of the Atlantic, and what traders should keep in mind heading into the upcoming sessions.
## Macro Overview: Dollar Regains Appeal
Recent developments in macroeconomic data have supported a narrative favoring the U.S. dollar over the Euro. Although markets started the year by pricing in multiple Federal Reserve rate cuts, recent strong labor market data and sticky inflation have cast doubt on the pace and scope of such easing.
Key macroeconomic drivers influencing EUR/USD include:
**1. U.S. Economic Indicators Remain Strong**
– The U.S. labor market continues to show resilience, with low unemployment claims and steady job growth.
– Inflation, while slowly cooling, remains well above the Federal Reserve’s 2 percent target, prompting hawkish commentary from Fed officials.
– Core PCE, the Fed’s preferred inflation metric, still suggests that underlying price pressures are persistent.
**2. Eurozone Faces Economic Fragility**
– In contrast, the Eurozone economy shows signs of stagnation. Recent PMI surveys have indicated sluggish activity across both the manufacturing and service sectors.
– Harmonized Index of Consumer Prices (HICP) and other inflation measures in the Eurozone have declined, possibly giving the European Central Bank (ECB) scope for a more dovish posture.
– Germany, the Eurozone’s largest economy, continues to underperform, which adds to the challenges facing the Euro.
**3. Central Bank Divergence**
– Traders are now repositioning based on expectations that the Fed will keep interest rates higher for longer.
– The ECB, on the other hand, may adopt a more cautionary stance, particularly if inflation continues to slow and economic activity remains underwhelming.
## EUR/USD Technical Analysis: Bulls Face Tough Resistance
Technically, the EUR/USD pair has struggled to maintain bullish momentum. Although buyers attempted to initiate a rally, strong resistance capped gains, pushing the pair back toward support levels. A look at the charts reveals several important takeaways:
**Daily Chart Insights**:
– The pair recently attempted to break above the 1.0900 resistance level but failed to establish momentum beyond that figure.
– A series of lower highs has developed, indicating persistent selling pressure on any bullish attempts.
– The 200-day Simple Moving Average (SMA) acts as an important support and resistance reference. The price is currently hovering near this metric, suggesting indecision.
**Key Technical Levels to Watch**:
– Support:
– 1.0820: This area serves as an interim support based on recent intra-day lows.
– 1.0780: A sustained move below this level could invite further selling toward the 1.0700 handle.
– Resistance:
– 1.0900: Psychological and technical resistance.
– 1.0960: Previous high before the latest decline, which also aligns with trendline resistance.
**Momentum Indicators**:
– RSI (Relative Strength Index) hovers around the 50 midpoint, indicating a lack of strong directional bias.
– The MAC
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