**EUR/USD Outlook Remains Positive as Traders Eye Powell’s Testimony**
*Original article by Matt Weller, FOREX.com*
*Rewritten and expanded version*
The EUR/USD currency pair continues its upward trend, holding above recent support levels as investors shift focus towards upcoming commentary from Federal Reserve Chair Jerome Powell. In an environment marked by cautious monetary optimism and a shifting macroeconomic backdrop, the euro has subtly strengthened against the greenback, driven by expectations for divergent monetary policy paths between the European Central Bank (ECB) and the U.S. Federal Reserve.
As global markets look for additional clues on central bank policy, particularly from the U.S., the euro-dollar exchange rate remains at the forefront of investor strategies. The EUR/USD, which accounts for the largest share of global forex turnover, serves as a bellwether not only for currency markets but also for broader investor sentiment regarding inflation, interest rates, and economic growth.
This article explores the current technical outlook for EUR/USD, macroeconomic drivers from both sides of the Atlantic, and what traders should monitor in the week ahead, particularly as the Fed Chair testifies before Congress.
## EUR/USD Technical Analysis Supports Bullish Outlook
The EUR/USD pair has clicked higher in recent sessions, riding the momentum created by weakening U.S. yields, stable eurozone data, and investor expectations of fewer Federal Reserve rate hikes in 2024.
Key technical observations include:
– **Support and resistance zones**:
– Support is visible near 1.0700 to 1.0710, which had previously acted as a key resistance area earlier this year.
– On the upside, resistance is nearing around 1.0900 to 1.0950, with multiple touches in this region over recent months.
– **Trendline convergence**:
– A bullish reversal pattern appears to be forming following a series of higher lows observed since mid-May.
– The 50-day simple moving average has begun to curl upwards, signaling medium-term bullish momentum.
– **Momentum indicators**:
– Relative Strength Index (RSI) is holding above 50, which is typically interpreted as a positive sign.
– MACD (Moving Average Convergence Divergence) shows a bullish crossover, further supporting an upward outlook.
These technical indicators suggest the potential for further gains in EUR/USD, especially if macroeconomic conditions remain supportive. However, traders remain cautious ahead of potential event risks that could impact directional bias.
## Macro Fundamentals Shaping EUR/USD
The euro’s relative strength over recent weeks has been attributed to changing perceptions around interest rate trajectories in both the EU and the U.S. The following macro factors have become central in shaping EUR/USD dynamics.
### Key Drivers from the Eurozone Side:
– **ECB’s cautious approach to rate cuts**:
– While the ECB delivered a 25-basis-point rate cut in June 2024, policymakers have signaled a cautious approach to further easing.
– Some ECB board members have hinted that further rate reductions are contingent upon data, particularly inflation prints and wage growth.
– **Eurozone inflation staying sticky**:
– Core inflation in several eurozone nations remains above the ECB’s 2 percent target.
– This has raised doubts about aggressive monetary easing in the near term.
– **Improving economic sentiment**:
– Recent PMI data has shown gradual improvement in manufacturing and services sectors in Germany, France, and Spain.
– Consumer confidence has stabilized, and unemployment figures remain relatively low.
Together, these factors suggest an ECB likely to proceed with additional cuts but at a measured pace, reinforcing the notion of a less dovish path than initially anticipated.
### U.S. Economic Dynamics and Fed Policy
On the other side, the U.S. economy has shown signs of cooling, compelling investors to reassess the Federal Reserve’s rate-hike narrative.
– **Softening labor market**:
– The U.S. nonfarm payrolls report for May showed slowing job
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