Title: EUR/USD Price Outlook: Key Breakout Through 1.1745 Resistance Appears Likely As US Dollar Weakens
By FXStreet Analyst Pablo Piovano
The EUR/USD currency pair is currently showing bullish momentum, with strong indications that a breakout above the critical resistance level at 1.1745 is highly probable. Supported by a weakening U.S. dollar and improved risk sentiment across global markets, the euro is gaining traction, and investors are increasingly confident that a sustained bullish trend may be in the making.
This article outlines the primary catalysts behind the recent strength of the EUR/USD pair and elaborates on the technical and fundamental factors pointing to a potential breakout.
Key Drivers Behind EUR/USD Price Action
1. Weakness of the U.S. Dollar
The dollar index (DXY), which measures the performance of the U.S. dollar against a basket of major currencies, has experienced notable declines over recent sessions. Several contributing factors include:
– Dovish signals from the Federal Reserve
– Decreasing U.S. Treasury yields
– Softening macroeconomic data out of the U.S.
– A broader shift in market sentiment toward riskier assets
These developments have put downward pressure on the dollar, boosting demand for rival currencies, particularly the euro.
2. Federal Reserve’s Dovish Tone
Market participants continue to digest the Federal Reserve’s less hawkish stance. The central bank has tempered expectations regarding interest rate hikes, focusing more on sustaining the economic recovery, especially amid lingering concerns over disinflation and labor market uncertainty.
Key highlights from recent Fed commentary:
– Emphasis on data dependency before making rate decisions
– Fed Chair Jerome Powell’s acknowledgment of easing inflationary pressures
– Cautious positioning toward aggressive policy tightening
As a result, expectations for immediate monetary tightening in the U.S. have cooled, which in turn weakens the dollar’s relative attractiveness.
3. Eurozone Stability and Improving Sentiment for the Euro
The euro is benefiting from a relatively stable economic backdrop within the Eurozone. While the bloc faces challenges like all major economies, several positives have underpinned support for the single currency:
– Resilient economic indicators in countries such as Germany, France, and the Netherlands
– Stronger-than-expected manufacturing and services PMI data
– Upbeat investor confidence metrics
– A more proactive stance from the European Central Bank (ECB) on inflation control
Although the ECB remains cautious, recent comments from policymakers suggest a readiness to adapt policy if inflationary conditions persist longer than expected.
Technical Analysis: EUR/USD Prepares for Breakout
From a technical standpoint, EUR/USD is inching closer to a critical inflection point. The pair recently tested an overhead resistance at 1.1745 and is forming a structure suggestive of a bullish continuation pattern.
Highlights from current price action include:
– A rising trendline providing dynamic support from previous lows
– Consolidation above the 50-day and 100-day moving averages
– An ascending triangle pattern forming on the 4-hour and daily charts
Traders and analysts are closely watching the pair’s ability to decisively clear the 1.1745 hurdle, as a confirmed breakout above this level could open the door toward further upside potential.
Key Technical Levels to Watch
Immediate Resistance:
– 1.1745 – Major overhead resistance formed by previous swing highs
– 1.1800 – Psychological round number and previous intraday reversal point
– 1.1880 – Multi-week high and potential target in case of breakout confirmation
Support Zones:
– 1.1680 – First area of support, coinciding with a short-term ascending trendline
– 1.1635 – Base of the current bullish structure, and near prior breakout level
– 1.1590 – Support from the 50-day moving average
Should the breakout occur and hold above 1.1745, buying pressure is likely to accelerate, drawing in additional momentum traders and
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