Original article by Fawad Razaqzada. This is a rewritten and expanded version based on the article titled “EUR/USD: Break Above 1.1600 Could Signal Start of Next Bullish Leg,” originally published on Investing.com.
Title: EUR/USD Technical Outlook: A Sustained Break Above 1.1600 May Mark the Beginning of a Bullish Phase
The euro inched higher against the U.S. dollar recently, gaining momentum as traders and investors evaluate macroeconomic conditions, central bank policies, and global market sentiment. A major focus for forex markets remains the EUR/USD pair, which has shown signs of reversing its previous downtrend, leading to speculation that a sustained breakout above the 1.1600 resistance level could catalyze a longer-term rally.
With inflationary pressures building across major economies and central banks signaling gradual shifts in monetary policy, the FX market has been brimming with speculation. In this context, the EUR/USD’s recent price moves become even more important, as traders try to determine whether a breakout upward can sustain itself or if it will fizzle out and return to the previous range-bound or downward trajectory.
This article examines the technical and fundamental drivers influencing the recent behavior of the EUR/USD pair and discusses whether a confirmed breakout above the 1.1600 threshold might indeed mark the start of the next bullish leg in its ongoing trend evolution.
Current Technical Landscape
As of the latest trading sessions, the EUR/USD currency pair has pushed higher, testing key resistance levels. Although the broader trend over the past several months showed weakness for the euro against the dollar, recent price action shows signs of possible reversal or consolidation, depending on how the pair reacts to strong resistance zones.
Key Technical Factors:
– The 1.1600 resistance level has proven to be a pivotal psychological and technical barrier. It served as former support during earlier phases of trading but flipped to resistance in recent downturns.
– The 50-day and 200-day moving averages remain significant markers for trend confirmation. Currently, EUR/USD is attempting to breach above the 50-day moving average, with the 200-day still acting as a longer-term check on bullish momentum.
– Positive divergence between price and momentum indicators such as the RSI (Relative Strength Index) suggests diminishing downside pressure.
Should the EUR/USD manage to close decisively above 1.1600 on a daily basis, it would likely signal a strengthening in bullish sentiment. In that case, traders may shift toward building long positions, expecting the pair to extend toward the next resistance level near 1.1700 or higher.
Fundamental Backdrop: Eurozone vs. US Dynamics
A number of macroeconomic factors are underpinning the EUR/USD price movements. From inflation and employment dynamics to interest rate expectations, traders remain highly focused on central bank policy, particularly those of the Federal Reserve and the European Central Bank (ECB).
Key Fundamental Considerations:
– Inflation: Both the U.S. and the Eurozone are grappling with elevated inflation metrics. In the U.S., the CPI has reached multi-year highs, prompting the Federal Reserve to acknowledge the need for monetary tightening sooner than previously expected.
– Interest Rate Expectations: The Federal Reserve has adopted a more hawkish tone, signaling that rate hikes may be brought forward. Meanwhile, the ECB remains cautious, emphasizing the transitory nature of current inflation pressures and that tightening conditions now could jeopardize post-pandemic recovery.
– Growth Forecasts: Although both regions are recovering, the pace and strength vary. The U.S. economy bounced back sharply due to aggressive fiscal and monetary stimulus, while parts of the Eurozone have been slower due to prolonged lockdowns and fiscal fragmentation among member states.
The relative strength of the U.S. dollar compared to other major currencies, including the euro, has often served as a haven in times of turbulence. However, with U.S. monetary policy tightening expected to be gradual rather than aggressive, the euro may benefit if ECB sentiment starts to gradually lean more
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