Title: EUR/USD Bulls Regain Control, Eyeing Higher Levels
Original article by Valeria Bednarik, FXStreet
Adaptation and expansion by Assistant
The EUR/USD currency pair began the trading day on strong footing as bullish momentum returned, pushing the euro higher against the US dollar. The pair capitalized on a more risk-on market sentiment and shifted its short-term technical outlook in favor of further gains. Analysts and traders are closely watching immediate resistance and support levels to assess whether this uptrend can be sustained or if a correction might be imminent.
This expanded article delves into the current EUR/USD price action, underlying fundamentals, technical setups, and key support and resistance levels. It also explores broader macroeconomic trends that may shape the pair’s movements in the coming sessions.
Market Overview
– The euro is outperforming the US dollar at the beginning of the session, managing to push the EUR/USD pair higher.
– A broad-based weakness in the US dollar is one of the primary drivers behind the euro’s rally.
– Traders are now pricing in a softer Federal Reserve stance following recent economic data from the United States that suggests inflationary pressures may be moderating.
– Market sentiment on the EUR/USD pair has shifted towards moderate bullishness, although risks remain skewed based on macroeconomic developments and central bank rhetoric.
Inflation and Central Bank Expectations
Central bank policy divergence remains a key factor weighing on the EUR/USD pair. However, recent signals from the Federal Reserve suggest potential for a pause or pivot in its tightening cycle.
Key developments:
– US Core Consumer Price Index (CPI) data, which missed expectations, has reinforced belief that inflation is cooling. Core inflation rose at a slower rate than anticipated, easing fears over persistent price pressures.
– Such inflation data increases the likelihood that the Federal Reserve will hold interest rates steady in the near future or consider easing by the first quarter of next year.
– On the European side, European Central Bank (ECB) policymakers have expressed concerns about ongoing inflation, and there’s cautious optimism that the worst might be over.
– While the ECB remains committed to gradually bringing inflation down to its 2 percent target, the recent improvement in eurozone economic indicators has helped uplift sentiment.
EUR/USD Technical Analysis
From a technical perspective, EUR/USD bulls appear to be taking control of the trend, suggesting further upside in the short term. The pair has broken above key technical levels, opening the door for another leg higher.
Important technical observations include:
– The EUR/USD pair has crossed above its 20-period simple moving average on the 4-hour chart. This often indicates an early bullish trend shift.
– Momentum indicators such as the Relative Strength Index (RSI) are showing upward bias, currently holding above the neutral 50 mark but not yet in overbought territory.
– The pair has made a clear higher high, surpassing the session’s previous peak, suggesting increasing buyer conviction.
– The MACD (Moving Average Convergence Divergence) line is above the signal line, further confirming bullish momentum.
Key Levels to Watch
Support levels:
– 1.0870: A near-term support zone that previously acted as resistance. Holding above this level suggests bullish structure remains intact.
– 1.0830: A critical Fibonacci retracement level that aligns with the 38.2 percent retracement of the recent bullish move.
– 1.0800: A psychological round number, as well as a former resistance-turned-support area.
Resistance levels:
– 1.0930: The first key obstacle for bulls, representing a prior swing high and aligning with short-term resistance.
– 1.0970: An area with confluence of technical resistance from earlier in July. A break above this would reinforce the bullish outlook.
– 1.1000: A major psychological level that has historically acted as a magnet for price action. A successful break and hold above this would indicate strong bullish commitment and potentially signal a longer-term trend reversal.
Intr
Explore this further here: USD/JPY trading.