**EUR/USD Eyes Another Breakout as the US Dollar Faces Persistent Pressure**
*By InvestingLive Staff Writer | Originally published at InvestingLive.com*
EUR/USD continues to show signs of strength with the currency pair inching toward a potential breakout from its well-established trading range. As the US dollar maintains a weak posture, several underlying macroeconomic factors are providing support to the euro, which may lead to increased volatility and a decisive move in the markets. The currency market is currently watching for any signs of confirmation that the pair is ready to breach key resistance levels, with traders weighing global inflation trends, US Federal Reserve policy uncertainty, and European Central Bank statements.
This article analyzes the current trends driving EUR/USD price action, evaluates the technical setup of the pair, and offers insights into the possible trajectories the currency may take in the short to medium term.
## The US Dollar Is on the Backfoot
The continued weakness in the US dollar has been one of the primary catalysts supporting EUR/USD. Several factors are contributing to the dollar’s underperformance:
– **Cooling Inflation in the US**: Recent data suggests that inflation may be gradually declining. A softer inflation environment puts less pressure on the Federal Reserve to maintain a hawkish policy stance.
– **Dovish Shift in Fed Expectations**: Markets are increasingly convinced that the Federal Reserve is nearing the end of its monetary tightening cycle. Some investors are even pricing in possible rate cuts in the first half of 2025 if economic conditions deteriorate.
– **A Softer US Labor Market**: Key labor market indicators, including slower job creation and subdued wage growth, indicate that the US economy may be moderating. This weakens the dollar further as it reduces the likelihood of additional rate hikes.
– **Political Gridlock and Fiscal Concerns**: Debt ceiling debates and budget discussions heighten concerns about fiscal policy in the US. These political risks often erode investor confidence and weaken the dollar.
All these factors have weighed on the greenback, making it less attractive as a safe-haven asset in the short term. This has opened the door for the euro to regain some lost ground, pushing EUR/USD closer to a technical breakout point.
## Euro Gathers Momentum
Unlike the dollar, the euro has been underpinned by relatively stable macroeconomic signals. While the Eurozone economy remains sluggish, some positive developments have supported the common currency:
– **Resilient Core Inflation in the Eurozone**: Despite slower growth, core inflation remains elevated in many parts of the Eurozone, supporting expectations that the European Central Bank will maintain a cautious stance on interest rates.
– **ECB’s Hawkish Rhetoric**: Several ECB policymakers continue to emphasize the importance of containing inflation, with minimal indications of an imminent pivot to rate cuts.
– **Improving German Economic Indicators**: As Europe’s largest economy, Germany’s industrial production numbers and export data have shown signs of stabilization. This helps reinforce investor confidence in a broader Eurozone recovery.
– **Stable Political Landscape**: Compared with the US, the Eurozone is currently experiencing relatively moderate political risk. This stability has enabled the euro to benefit from a shift in global portfolio allocations into European assets.
Taken together, these factors support a near-term bullish trend in the EUR/USD pair, which is now approaching a key technical threshold that could signal a major shift in trader sentiment.
## Technical Analysis: Approaching Breakout Territory
The EUR/USD pair continues to trade within a well-defined range, constrained between 1.0650 and 1.0850 for several weeks. However, current price action suggests the pair could be on the verge of breaking out of this consolidation phase.
Key Technical Levels:
– **Resistance at 1.0850–1.0880**: This zone has consistently capped upside momentum. A break and close above it would confirm bullish conviction and likely lead to a test of the 1.0950 psychological level.
– **Support at 1.0650**
Read more on EUR/USD trading.