EURUSD at a Crossroads: Will Bulls Break Through or Face Another Pullback?

As we navigate through the week, attention turns to several high-impact economic events poised to influence market dynamics. These include key reports from the UK, Switzerland, and the USA, encompassing GDP, CPI, PPI, unemployment claims, and retail sales figures.

In the forex realm, EURUSD has demonstrated notable movement. After rebounding from its low early in January, the pair surged above key technical levels, reaching new heights before facing retracements. Currently, EURUSD is testing significant resistance, with momentum indicators suggesting a possible continuation of the upward trend if it can decisively break past current barriers. The currency pair’s movements reflect not just technical positioning but also the broader market sentiment influenced by geopolitical developments and economic data.

Thursday 09:00 am (GMT+2) – UK: GDP m/m (GBP)
Thursday 09:30 am (GMT+2) – Switzerland: CPI m/m (CHF)
Thursday 15:30 (GMT+2) – USA: PPI m/m (USD)
Thursday 15:30 (GMT+2) – USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) – USA: Retail Sales m/m (USD)

Following its rebound from the January 13 low of 1.01768, marked by a Spinning Bottom candlestick pattern, EURUSD extended gains above the 50-period Exponential Moving Average (EMA), reaching a high of 1.05321—a 3% increase. However, bullish momentum proved unsustainable, leading to a retracement toward 1.02089 on February 3.

Currently, the pair is attempting another breakout, with 1.04418 emerging as a critical resistance level. A decisive breach could pave the way for further upside. Momentum indicators reinforce a bullish bias—the Momentum Oscillator remains above 100, signaling continued upward pressure, while the Relative Strength Index (RSI) holds above 50, suggesting growing buying interest.

Additionally, prices are trading above both the 20-period and 50-period EMA, supporting the near-term uptrend. However, the 20-period EMA has yet to cross above the 50-period EMA, indicating that bullish confirmation remains incomplete. A sustained move above 1.04418 could validate further upside potential.

Should the buyers maintain market control, traders may direct their attention toward the four potential resistance levels below:

1.04418: The initial resistance level is identified at 1.04418, aligning with the daily high from February 5.

1.05321: The second price target is set at 1.05321, representing the daily high reached on January 27.

1.06709: The third price objective is observed at 1.06709, corresponding with the weekly resistance, R3, calculated using the standard Pivot Points methodology.

1.08177: An additional upside target is projected at 1.08177, mirroring the 61.8% Fibonacci Retracement drawn from the high point, 1.12130, to the low point, 1.01768.

Should the sellers take market control, traders may consider the four potential support levels listed below:

1.03234: The initial support level is estimated at 1.03234, corresponding to the weekly Pivot Point, PP, calculated using the standard methodology.

1.02760: The second support level is identified at 1.02760, representing the swing low marked February 10.

1.01768: The third support level is seen at 1.01768, reflecting the daily low marked January 13.

1.00905: An additional downside target is 1.00905, mirroring the weekly support, S2, calculated using the standard Pivot Points methodology.

The euro climbed 0.5% against the dollar as optimism surged over potential US-Russia negotiations to end the Ukraine war. The diplomatic shift weakened demand for safe-haven assets like the dollar, boosting the European currency.

European stock index futures gained 1%, mirroring a rally in Asian equities, while investors looked past hotter-than-expected U.S. inflation figures. Traders adjusted expectations for Federal Reserve rate cuts, now forecasting only one reduction in December.

Oil prices extended their decline amid speculation that geopolitical risks to Russian supply may ease, adding further support to European markets. The euro’s strength reflects broader market sentiment, which favors risk assets amid diplomatic and economic shifts.

In conclusion, EURUSD remains at a critical juncture, with price action testing key resistance levels amid improving market sentiment. While technical indicators suggest bullish momentum, confirmation will depend on a decisive break above 1.04418. Traders should remain attentive to upcoming economic events and geopolitical developments, which could further influence the pair’s trajectory. If bullish momentum sustains, further gains toward higher resistance levels remain possible, whereas failure to break key levels may result in renewed downside pressure.