EUR/USD Sellers Return at Rally Peaks
Market Overview
The EUR/USD rally stalled on Thursday after encountering strong resistance at the highs of November 2024, as the US Dollar’s decline paused following softer-than-expected inflation data. The Euro initially benefitted from the weakening Dollar, but buyers retreated after reaching key resistance levels, prompting a corrective move. While the broader outlook for the US Dollar remains bearish due to expectations of further monetary easing, EUR/USD appears poised for a consolidation phase before any potential continuation of the uptrend.
Technical Analysis
On the hourly chart, sellers have successfully capped gains at a lower high, pushing the pair toward the immediate support at 1.08752. The price action now suggests a range-bound movement, with a break below this level likely opening the path for further downside towards 1.08610. If bearish momentum extends beyond this point, key downside targets emerge at 1.08429 and 1.08230.
Conversely, if buyers regain control, they must overcome the resistance at 1.09274 to invalidate the current bearish bias and signal a resumption of the previous upward trend. Until then, the pair remains vulnerable to short-term corrective pressure.
Key Technical Levels
- Resistance 1: 1.08951
- Resistance 2: 1.09274
- Support 1: 1.08752
- Support 2: 1.08429
- Support 3: 1.08230
Fundamental Drivers
The European session will focus on industrial production data, which is expected to show a 0.5% expansion for January, marking a significant improvement from the previous -0.1% contraction. A stronger-than-expected result could provide a temporary boost to the Euro, reinforcing the outlook for economic recovery.
In the US, the Producer Price Index (PPI) and weekly jobless claims will be closely watched. Any deviation from expectations could impact Fed rate cut expectations, influencing Dollar sentiment. Additionally, the Treasury bond auction results may further dictate market flows, affecting the Dollar’s near-term direction.
Conclusion
EUR/USD is encountering selling pressure at key resistance levels, with technical indicators pointing to a possible pullback. A break below 1.08752 could extend losses toward 1.08429, while a move above 1.09274 would revive bullish momentum. Market participants will closely monitor upcoming economic reports for directional cues, with Eurozone industrial production and US inflation data being the primary catalysts for short-term volatility.
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