**EUR/USD Rebounds After Falling to New Lows: Bearish Break Fails to Hold**
*Original article by Adam Button, ForexLive via TradingView*
The EUR/USD pair faced heavy selling pressure early Monday, dipping to fresh two-month lows around the 1.0670 level during the latest trading session. However, the move failed to sustain, and buyers emerged to push the pair back above the 1.0700 handle. This price action signals a potential shift in short-term market sentiment after multiple attempts to breach key support levels.
In this article, we examine the factors leading to the initial drop in EUR/USD, the reasons behind the sudden rebound, implications for technical traders, and what to anticipate for the rest of the trading week. Drawing on insights first shared by Adam Button on ForexLive, this analysis dives deeper into the euro-dollar exchange rate and its surrounding dynamics.
## EUR/USD Hits New Multi-Month Lows
The euro came under considerable pressure at the beginning of the European trading session. The bearish momentum pushed EUR/USD below support at 1.0700 and to new lows of around 1.0670. This price area had been closely watched by traders as it corresponded to the March and April swing lows.
### Contributing Factors to the Early Drop
Several important catalysts seemed to drive the euro lower:
– **Relative U.S. Dollar Strength**: The U.S. economy has shown more resilience than its European counterparts. Recent data continues to point toward moderate strength in both labor and consumer sectors, supporting U.S. dollar buying interest.
– **Persistent Hawkish Fed Expectations**: With inflation in the U.S. staying elevated, the Federal Reserve has maintained a relatively hawkish stance in its communications. Market pricing continues to delay rate cut expectations, unlike in the eurozone.
– **Divergence in Growth Outlook**: The European Union’s latest economic forecasts point to more subdued growth and fiscal headwinds in key member states like Germany and France. This has kept the euro on the defensive against the dollar.
– **Rising U.S. Treasury Yields**: As U.S. Treasury yields climbed following stronger-than-expected job and inflation data, demand for dollar-denominated assets grew, which further weighed on EUR/USD.
## Failed Breakdown Below Target Area
Despite the obvious bearish momentum early in the session, the move below 1.0700 quickly began to unravel. EUR/USD touched the low 1.0670s, but the price could not find acceptance below the key support zone. Sellers failed to build momentum below this level, and reversal attempts began taking shape by mid-day.
### Technical Factors at Play:
– **Lack of Follow-Through Support**: Although the EUR/USD broke key support levels briefly, volume did not confirm a broader shift, and there were no sustained sell-offs to push the pair lower.
– **Oversold Conditions**: Technical indicators such as the Relative Strength Index (RSI) showed oversold signals on shorter time frames like the H1 and H4 charts, making the pair ripe for a corrective move.
– **Price Action Reversal**: The price structure saw bullish candles forming around the lows, prompting some traders to initiate long positions or close out shorts.
The result was a steady climb back above the 1.0700 psychological handle, indicating that the bearish break had failed for now. This kind of fake-out move often forces bearish traders to reduce exposure, which fuels further upside in the short term.
## Key Technical Levels and Chart Structure
From a chartist perspective, recent price action presents multiple important reference points that could dictate positioning in the sessions ahead.
### Support Levels To Watch:
– **1.0670**: This was the most recent low and marks near-term support. If bearish momentum resumes, this level will likely be tested again. A confirmed break could open room toward the 1.0600 area.
– **1.068
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