Current price developments are beginning to receive support from several key factors, particularly as pressures on energy prices begin to ease. The decline provides room for the euro to regain momentum, as lower energy import costs for the eurozone could improve the region's economic growth prospects.
However, the pair's directional bias remains largely dependent on the Federal Reserve's stance. If they deliver a less aggressive signal than the market currently anticipates, the downward pressure on the US dollar could intensify, opening the door for EUR/USD to extend its advance.
On the other hand, the US dollar has so far maintained a relatively resilient performance despite the sharp decline in oil prices. Markets appear to have largely discounted the impact of the oil drop, suggesting the immediate reaction has already been absorbed.
Following weakness earlier in the week, it recovered and retreated towards its pre-weekend levels. This indicates that investors continue to view US fundamentals (including economic strength and the Federal Reserve's rate outlook) as the main catalyst for the dollar's directional movement.
For now, market attention is firmly focused on the outcome of the FOMC meeting and the policy directions of new Federal Reserve Chairman Kevin Warsh. Additionally, geopolitical developments and the stability of the supply chain through the Strait of Hormuz remain key variables that must be closely monitored.
As long as no new disruptions arise in global oil distribution routes, the bullish scenario for EUR/USD remains a viable prospect.
Technical analysis
EUR/USD: daily
Over the past two weeks, EUR/USD has begun to show a constructive shift in momentum, with evidence accumulating in favor of a bullish continuation. The price has seen a significant recovery from the 1.1500 support area, a level that has historically acted as a significant demand zone. The pair is now attempting to move towards a confluence resistance structure, where a descending trend line converges with the 50 and 200 period simple moving averages (SMA). This dynamic resistance group represents a critical inflection point: a decisive close above this zone would mark a notable shift in the broader trend structure and could attract renewed buying interest from momentum participants.
On the 4-hour time frame, price action continues to trade within a well-defined bearish channel, characterized by a series of lower highs and lower lows that reflect persistent short-term selling pressure. In the immediate term, the most likely sequence of events involves a push towards the upper boundary of this channel, which aligns with the descending resistance line.
At that point, the market faces a binary outcome. If buyers demonstrate enough strength to absorb the supply at the resistance line and push the price to a breakout close above the structure, this would signal a potential change in near-term sentiment and open the door to a more sustained upside recovery move. Conversely, if the price encounters a rejection in the resistance zone (as evidenced by bearish candlestick formations or lack of follow-up buying), the path of least resistance would favor the continuation of the prevailing downtrend, and the price would likely seek a new lower low beyond the current low.
Conclusion
EUR/USD is currently at a technically significant crossroads. While the daily chart indicates early bullish recovery momentum from the 1.1500 support zone, the 4-hour structure remains limited within a bearish channel. The key catalyst lies in the upcoming FOMC meeting: a less hawkish stance from the Federal Reserve could provide the fundamental trigger needed to complement the technical setup and push the pair towards a breakout above the dynamic resistance confluence. Until that confirmation materializes, price action is likely to remain range-bound with a cautious directional bias.
***
Disclaimer: This analysis is intended for informational and educational purposes only. It does not constitute financial advice, investment recommendations or a solicitation to buy or sell any financial instrument. Currency trading carries a substantial level of risk and may not be suitable for all investors. Past performance is not indicative of future results. Always perform your own due diligence and consult a licensed financial advisor before making any trading decisions.
