EURUSD at 4-Month High – Can Bulls Sustain the Momentum?

EURUSD on a 4-hour timeframe 

EURUSD on a 4-hour timeframe has experienced a strong bullish trend, recently reaching a four-month high around 1.0940. The pair has appreciated nearly 5% since the start of March, driven by a combination of technical breakouts and fundamental tailwinds. This upward movement followed a sustained rally that began in February, with price action establishing higher highs and higher lows. However, the emergence of bearish divergences in momentum indicators suggests that the rally may be losing steam, potentially leading to a corrective pullback. 

Recent price action indicates that EURUSD faced resistance near 1.0940, stalling after an extended upward move. Despite holding above key moving averages, the formation of small-bodied candles and wicks near this level suggests increasing selling pressure. Additionally, a bearish divergence has formed on the RSI, as price made a higher high while RSI posted a lower high, signaling weakening momentum. The stochastic oscillator is currently in oversold territory, reinforcing the likelihood of a near-term pullback. However, key support remains at 1.0769, where buyers may attempt to reassert control. 

From a fundamental perspective, multiple macroeconomic factors are influencing EURUSD. The euro has been buoyed by Germany's fiscal policy shift, with Chancellor Friedrich Merz abandoning strict debt rules in favor of increased spending on infrastructure and defense. Additionally, France and Italy's push for joint EU funding further supports the Eurozone’s growth outlook. On the US side, concerns over potential tariffs imposed by Donald Trump, along with fears of a "Trump recession," have weakened the dollar. Market speculation that the Federal Reserve may cut rates faster than expected has also pressured the greenback, contrasting with the ECB's relatively steady stance. 

The primary scenario remains bullish as long as EURUSD holds above 1.0769. A sustained break above 1.0940 could open the door for further gains toward 1.1154. Given the broader fundamental backdrop of Eurozone fiscal expansion and US economic uncertainty, the euro may continue to find support. However, bullish momentum must be reaffirmed with a clean breakout above resistance. 

Alternatively, if EURUSD fails to hold 1.0769, a deeper retracement toward 1.0659 or even 1.0524 may occur. This scenario would be triggered by stronger-than-expected US economic data or a shift in Federal Reserve policy expectations. Upcoming US PPI and jobless claims data, as well as ECB speeches, could introduce short-term volatility, making these levels critical to watch. 

Investors should remain attentive to upcoming high-impact events, including the Fed’s interest rate decision on March 19 and key economic releases such as US Producer Price Index (PPI) data and Eurozone industrial production figures. Any surprise deviations in these indicators could shift market sentiment, potentially influencing EURUSD's next directional move. Given the presence of bearish divergences, a cautious approach is warranted, with traders closely monitoring support levels for potential reversals or breakdowns.  

SUMMARY: 

• EUR/USD has experienced a strong 5% rally since early March, reaching a four-month high near 1.0940, driven by technical breakouts and favorable Eurozone fundamentals. 
• Bearish divergence in RSI and oversold stochastic indicators suggest the bullish momentum may be weakening, with a potential pullback ahead. 
• Key support at 1.0769 remains crucial for maintaining the bullish outlook, while a break above 1.0940 could push the pair toward 1.1154. 
• Upcoming economic data, including US PPI and ECB speeches, could create short-term volatility and influence EUR/USD’s next move.