Recent positive reports from the Euro Area and a generally weaker U.S. dollar have pushed the EUR/USD pair higher from its weekly lows. Right now, the currency pair is testing an important resistance zone, increasing the possibility of extending a longer-term trend. Let’s take a deeper dive into the pair’s 4-hour time frame.
Last month, service PMI reports from the Euro Area showed improvement, with Germany, France, and the Euro Area exceeding their initial estimates. On the American side, the U.S. dollar hasn’t had it easy despite Treasury yields reaching new multi-month highs. Traders are dealing with early-year risk-taking and uncertainties surrounding President-elect Trump’s tariff plans.
Understanding market movements often comes down to the basics: fundamental factors drive directional biases and volatility conditions. If you haven’t already brushed up on the euro and U.S. dollar fundamentals, now’s a good time to review the economic calendar and keep abreast of daily news updates!
As for EUR/USD, it started the year just shy of 1.0200 but quickly shot up to the vicinity of 1.0430. This move brought it close to the R1 (1.0437) Pivot Point. Interestingly, this area also coincides with the 100 SMA on the 4-hour chart and a trend line resistance that has been valid since late September 2024.
The big question is whether this resistance zone will gather enough sellers to continue EUR/USD’s longer-term downtrend. If you notice bearish candlesticks closing below 1.0400, it might encourage sellers to pull EUR/USD down to its 2025 lows or even mark fresh monthly lows in the days ahead.
On the flip side, should the pair exhibit bullish candlesticks and manage a strong break above the 1.0450 psychological level, it could attract technical buyers and potentially spark a bullish reversal.
So, what’s your take? How do you see EUR/USD moving in the upcoming trading sessions? Regardless of your trading bias, remember to employ sound risk management practices and stay alert to key market catalysts that could sway overall sentiment!
