The EUR/USD currency pair has recently shown signs of forming a double-bottom pattern, indicating a potential reversal from its downtrend. This pattern typically suggests a bullish trend reversal, especially when confirmed by a breakout above key resistance levels. Currently, the pair has found support around the 1.0670 level, where it has bounced off twice, forming the bottom of the pattern.
The recent behavior of the European Central Bank (ECB) has been pivotal in shaping market sentiment towards the euro. Despite expectations and speculations about further interest rate cuts following the ECB’s recent 25 basis point reduction, ECB officials have refrained from committing to a clear path of additional cuts. This cautious approach, combined with diminishing political risks in France surrounding the parliamentary elections, has contributed to stabilizing the euro’s decline.
Looking ahead, market participants are keenly awaiting important economic data releases from the United States later in the week. Specifically, the revised GDP figures for Q1 and the Core PCE inflation index, which is the Federal Reserve’s preferred inflation gauge, will likely influence the direction of the EUR/USD pair.
A positive surprise in the US GDP revision could bolster the US dollar by signaling stronger economic resilience and potentially higher interest rates, which would be negative for the EUR/USD pair. Conversely, if the Core PCE inflation shows a continued upward trend year-on-year, it could support the euro by highlighting inflationary pressures in the US economy.
From a technical analysis perspective, a breakout above the 1.0760 resistance level would confirm the double-bottom pattern on the EUR/USD chart, suggesting a possible rally towards higher levels. The next significant resistance is expected around 1.09. However, if the pair fails to maintain above the 1.0670 support level and breaks lower, it could target this year’s lows near 1.06.
In conclusion, while the ECB’s stance and political developments in Europe are currently stabilizing the euro, upcoming US economic data releases will likely dictate short-term movements in the EUR/USD pair. Traders and investors should closely monitor these developments to gauge the potential for further direction in this major currency pair.