Fundamental overview
The euro came under fresh pressure following weaker-than-expected German inflation data, which reduced market expectations of further tightening by the European Central Bank (ECB). The softer inflation outlook has strengthened the case for a more dovish stance from the ECB, limiting the euro's upside potential.
At the same time, the US dollar continues to receive support from expectations that the Federal Reserve can maintain a relatively aggressive policy stance. The divergence between ECB and Federal Reserve expectations has created additional bearish pressure for .
With both fundamental and technical factors currently favoring sellers, market participants are closely watching whether EUR/USD can maintain its bearish structure or attempt a short-term recovery.
Technical analysis
EUR/USD Daily Period
EUR/USD continues to display a bearish market structure after being rejected from previous highs and forming a steady series of lower highs. The price remains below key dynamic resistance levels and continues to trade within a broader bearish channel, indicating that sellers are still in control of the overall trend.
The protected high at 1.16218 remains the key invalidation level. As long as the price remains below this zone, the bearish bias will remain intact and sellers will maintain control over the current market structure.
A continuation of selling pressure and a break below nearby support levels could open the possibility of further downside movement towards the next downside targets.
EUR/USD 4H Term
On the 4-hour time frame, EUR/USD has shown a short-term recovery after breaking back above the 50 SMA, suggesting that a temporary bullish retracement could occur.
The potential bullish area to monitor is around the support-turned-resistance zone, Fibonacci retracement levels and the 200 SMA, which currently acts as an important dynamic resistance level.
However, as long as the price remains below the 200 SMA, this recovery should be viewed as a short-term pullback within a broader downtrend, rather than a confirmed trend reversal.
On the other hand, if the price fails to hold above the 50 SMA and creates a false breakout, followed by a breakout of the bearish wedge pattern, EUR/USD could resume its downward movement with stronger bearish momentum.
Key levels to consider
Endurance:
- 1.1500 – 1.1550 → Fibonacci retracement area, previous support turned resistance and 200 SMA confluence
- 1.16218 → Protected/Low Maximum Override Level
Support:
- Recent swing low zone
- Next downside target zone if a bearish continuation develops
Conclusion
EUR/USD remains under downward pressure as weaker German inflation data reinforces expectations of a more dovish ECB, while a stronger US dollar continues to weigh on the pair.
From a technical perspective, a short-term bounce remains possible as long as the price remains above the 50-day simple moving average. However, the broader bearish outlook remains valid as EUR/USD trades below the 200 SMA and the protected high level of 1.16218.
The main focus will be whether buyers can push the price back above the resistance zone between 1.1500 and 1.1550 or if sellers regain control and push the pair towards new bearish targets.
Disclaimer: This market analysis is provided for informational and educational purposes only and does not constitute financial advice, investment advice or a recommendation to buy or sell any financial instrument. Trading in the financial markets involves significant risk and past performance is not indicative of future results. Always conduct your own research and consider your own risk management strategy before making any trading decisions.
