Title: EUR/USD Reclaims Bullish Momentum, Eyeing Further Gains
By: Pablo Piovano (Original article published on FXStreet)
The EUR/USD currency pair has strengthened recently, regaining its upward trajectory following a brief period of consolidation. With bullish signals pointing to renewed EUR demand, investors are increasingly optimistic about the pair’s near-term prospects. Underpinned by strong technical levels and macroeconomic fundamentals, the EUR/USD looks poised to continue its northbound movement.
This revised and expanded analysis builds on the original FXStreet article by Pablo Piovano and provides a deeper dive into the technical, fundamental, and future outlook of the EUR/USD pair.
Market Overview
The EUR/USD pair has been extending gains as the US dollar (USD) loses momentum across the board. The weakening of the greenback has given the Euro room to recover, particularly after bouncing from support levels established earlier in the quarter. Traders remain cautious, however, as market sentiment continues to be influenced by a confluence of variables including macro data releases, central bank policy expectations, and geopolitical developments.
Key Market Themes Influencing EUR/USD
Several major themes are currently shaping the direction of the EUR/USD pair:
– Softening US dollar: Contributing factors include dovish comments from Federal Reserve officials, mixed economic data from the US, and a general risk-on sentiment which tends to weigh on the safe-haven dollar.
– ECB policy stance: The European Central Bank has maintained a relatively cautious approach to monetary tightening compared to the Federal Reserve, but signs of resilience in Eurozone data are helping to stabilize the Euro.
– Technical rebound: The EUR/USD pair recently bounced off key technical support levels, triggering a wave of fresh buying interest.
– Improved risk appetite: Global markets have seen an uptick in sentiment, with equity indices and commodities showing strength, thereby reducing the appeal of the safe-haven USD.
Technical Analysis
From a technical standpoint, the EUR/USD has resumed its upward bias after forming a solid base around the 1.0650–1.0700 range. The recent breakout higher signals that buyers are regaining control, aiming to challenge key resistance zones in the days ahead.
Price Action Highlights:
– The pair broke through the 1.0800 mark, a psychological and technical resistance level.
– Price is moving above the 100-day Simple Moving Average (SMA), reinforcing the bullish view.
– The daily Relative Strength Index (RSI) has turned higher, suggesting increasing bullish momentum but remains below overbought territory.
– The Moving Average Convergence Divergence (MACD) indicator shows a bullish crossover, further supporting upside continuation.
Short-Term Support and Resistance Levels to Watch
Support Levels:
– 1.0720: Recent swing low and initial support
– 1.0650: A critical floor that held during recent selloffs
– 1.0600: A key psychological level and prior resistance-turned-support zone
Resistance Levels:
– 1.0820: Immediate resistance level broken intraday, now acting as short-term ceiling
– 1.0870: An area where the price previously faltered; potential near-term challenge for bulls
– 1.0950: A medium-term resistance zone targeted if momentum continues
Macro Outlook
The macroeconomic backdrop for both the US and the Eurozone remains crucial in determining the long-term trajectory of the EUR/USD pair. Recent data from both regions showcases diverging economic paths, which could further influence future central bank decisions.
United States:
– US CPI inflation showed signs of moderation, causing markets to reduce expectations of further Fed tightening.
– Labor market data is robust but has started to cool, aligning with the Fed’s desire to prevent economic overheating without triggering a recession.
– Commentary from Fed officials has tilted slightly dovish, with increasing discussion around possibly halting rate hikes if inflation moderates further.
Eurozone:
– The European economy remains fragile but has shown modest signs of stabilization.
– Inflation readings in the
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