The upcoming key EU inflation data could play a decisive role in the currency pair's movement. With the ECB signaling potential inflation stabilization at 2% by 2025, future monetary policy may be less aggressive. On the other hand, the Fed has kept the possibility of further rate cuts on hold, with the market anticipating up to 100-125 basis points of rate reductions over the next 12 months. This potential alignment between Fed and ECB policies could support EUR/USD, but the long-term economic strength of the US may limit the euro's upside.
The US dollar has shown a significant rebound, recovering ground due to rising US Treasury yields, pushing EUR/USD down towards the 1.1110 level.
The main resistance is set at 1.1214 (2024 high), followed by the 2023 peak at 1.1275. Should EUR/USD break these levels, a significant recovery may unfold. On the downside, immediate support is at 1.1113, followed by 1.1082.
In the short term, EUR/USD could move sideways between the identified support and resistance levels, with EU inflation data and the US Non-Farm Payrolls (NFP) report acting as catalysts for significant movements. If inflation data shows a marked decline or NFP data underperforms, EUR/USD may break above the 1.1214 resistance level.
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