The pair stabilized around 1.1658 on Tuesday, following a period of volatility over the previous two sessions.
The market's attention remains firmly focused on upcoming US data, which is expected to provide crucial clarity on the future direction of Federal Reserve policy. The market is currently pricing in two this year, with the first expected in June. However, any upside surprise in inflation could significantly temper expectations for policy easing.
Supporting a more dovish outlook was last week's disappointing December NFP report, which revealed weaker-than-expected job growth.
Investors are also monitoring developments at the U.S. Supreme Court, which is expected to rule on the legality of President Donald Trump's tariff policy on Wednesday.
Earlier this week, they faced additional headwinds following reports that Federal Reserve Chair Jerome Powell could face scrutiny over his congressional testimony related to a building renovation project. This has raised concerns, albeit limited, about the perceived independence of the Federal Reserve.
Technical analysis: EUR/USD
H4 Chart:
According to the H4 chart, the pair forms a corrective pullback against the backdrop of the second bearish impulse. The immediate corrective target is 1.1700. Once this correction concludes, we anticipate the resumption of the downtrend, with the next downside target at 1.1555. This scenario is supported by the MACD indicator, whose signal line is below zero and points decisively downwards, reinforcing the current bearish momentum and the possibility of further declines.
H1 Chart:
According to the H1 chart, the market has completed a decline to 1.1655 and is now forming bullish corrective momentum towards 1.1700. Upon reaching this level, we expect a new wave of selling pressure to emerge. The stochastic oscillator aligns with this view, as its signal line is currently below 20, but is rising towards 80, indicating room for a short-term bounce before the next potential drop.
Conclusion
The EUR/USD pair is in a holding pattern ahead of key US inflation data, which will likely dictate the direction of the pair in the near term. While the technical structure remains bearish, a corrective bounce towards 1.1700 seems likely before sellers regain control. Higher than expected inflation could reinforce the dollar's strength and accelerate the move towards 1.1555.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
