**EUR/USD Bulls Eye Key Support Zone Before Attempting Further Gains**
*Adapted and expanded from an original article by IG Analysts at The Tradable.*
The EUR/USD currency pair has recently entered a consolidation phase, with bullish traders looking to verify the strength of support before initiating their next upward move. While the market shows signs of resilience, the trajectory that follows will heavily depend on traders’ interpretation of macroeconomic indicators and technical validation of support zones. As the Federal Reserve and the European Central Bank (ECB) continue to navigate complex economic landscapes, the pair’s recent performance reflects ongoing uncertainties with modest optimism for further upside.
This article explores the latest developments in the EUR/USD pair, outlines key technical levels traders are watching, and presents potential scenarios based on current market behavior and economic trends.
## Technical Overview: Consolidation After Gains
EUR/USD has experienced a modest rally in recent weeks after recovering from mid-April lows. The pair briefly surged past the 1.0800 mark, sparking renewed bullish sentiment. However, recent sessions have revealed hesitation near the 1.0850 level. This hesitancy suggests that traders may be expecting a pullback or needing confirmation of support before committing to higher price levels.
– The 1.0720–1.0750 area is being carefully monitored as key support
– Resistance near 1.0850–1.0900 levels remains intact and is currently capping upside
– Daily candlestick patterns suggest waning momentum, urging caution for bullish traders
While EUR/USD bulls are encouraged by recent strength, their continuation strategy depends largely on whether the pair can maintain above the support band around 1.0720. A breakdown below that could put pressure on bullish confidence and shift short-term momentum back in favor of sellers.
## Recent Economic Backdrop Supporting Price Action
Fundamentals in both the Eurozone and United States have influenced the pair’s behavior. Although U.S. inflationary pressures have begun to ease and the Federal Reserve has kept rates unchanged in recent meetings, European economic indicators have shown uneven recovery, with Germany and France offering mixed signals.
– **United States**: Inflation remains above the 2% target, though monthly data shows signs of moderation. The labor market continues to demonstrate strength, helping support the dollar in short-term scenarios.
– **Eurozone**: Inflation has moderated more rapidly, but economic activity remains relatively subdued. ECB policymakers have shifted towards a neutral tone, with some hinting at potential rate cuts if inflation continues falling steadily.
This divergence in monetary policy expectations has limited the dollar’s upside while lending support to the euro. However, until firm commitments come from both central banks, particularly the ECB, relative uncertainty remains.
## ECB-Fed Policy Positioning
The policy stances of the ECB and the Federal Reserve are crucial in shaping future trends in the EUR/USD pair.
– **Federal Reserve**: The Fed has paused rate hikes but remains cautious. Confidence in a soft landing scenario is rising, and rate cuts are not expected until late 2024 or early 2025, depending on continued inflation control.
– **ECB**: Inflationary cooling in the eurozone has allowed the ECB to adopt a slightly more dovish outlook. However, policymakers have stated that any future rate cuts would be highly data-dependent.
Markets have priced in the possibility that the ECB may move before the Fed in terms of rate reductions. Should this scenario unfold, it could tilt the EUR/USD balance to the downside. Conversely, if future U.S. inflation triggers Fed cuts earlier than anticipated, the euro might benefit from that comparative shift.
## Technical Chart Analysis: Key Levels to Watch
From a technical standpoint, bullish traders remain cautiously optimistic. However, they are closely monitoring specific support regions to confirm the sustainability of the uptrend.
– **Support Zones**
– 1.0720–1.0750: This is the immediate area bulls want to protect. A sustained move below it risks pushing the pair
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