Forex Outlook: Is EUR/USD Gearing Up for Another Rally?

EURUSD on a 1-hour timeframe 

EUR/USD on a 1-hour timeframe has experienced an upward trend within a rising channel, encountering resistance near 1.0522 and support at approximately 1.0450. Over the past few weeks, the price has oscillated between these levels, maintaining a structure of higher highs and higher lows. The pair has also demonstrated multiple bounces off the 100 (blue) and 200-period moving average (yellow), reinforcing its roles as dynamic support. Notably, each time the price has approached the lower trendline of the ascending channel, buyers have stepped in, supporting the continuation of the bullish structure. 

In recent sessions, the pair tested the lower boundary of the ascending channel near 1.0450 and briefly dipped below the 100-period moving average (blue) before rebounding. The 200-period moving average has served as a critical support level, triggering renewed buying interest. The price remains above this key moving average, suggesting that the broader trend is still intact, though volatility has increased in the short term. If price maintains its position near the lower channel boundary, another upward movement could be expected. 

Technical indicators present mixed signals. The Relative Strength Index (RSI) hovers around 47, indicating a neutral stance without a strong trend bias. Meanwhile, the Stochastic oscillator is rebounding from the oversold zone, suggesting that short-term bullish momentum could be building. The confluence of price action around moving averages and the lower trendline of the channel will be crucial in determining the next directional move. 

The primary scenario suggests that if the price holds above 1.0450 and sustains upward momentum, a retest of the upper boundary of the rising channel near 1.0522 is likely. A breakout above this resistance level could further strengthen bullish sentiment, with the next potential target extending beyond 1.0550. Traders will be watching for confirmation through increased volume and strong price action. 

A bearish scenario could materialize if the price fails to sustain above 1.0450 and experiences a decisive breakdown. In such a case, selling pressure may intensify, pushing the pair towards 1.0400. A breach below this level would expose the next support at 1.0350, confirming a potential trend reversal and increasing bearish momentum. 

The EUR/USD pair is currently influenced by several key fundamental factors. Political developments in Germany, including the recent victory of the conservative Christian Democrats, have been perceived positively by investors. Market participants are closely monitoring the timeline for forming a coalition government, as this could impact euro sentiment. On the economic front, speculation around potential changes to Germany's fiscal policy, particularly regarding the "debt brake" rule, is also shaping market expectations. Additionally, traders are awaiting the European Central Bank’s meeting minutes, which could provide insights into future interest rate decisions. The ECB may pause its rate-cutting cycle as the European economy shows signs of improvement. In the U.S., upcoming GDP data for Q4 2024 and Personal Consumption Expenditure (PCE) figures could significantly impact the pair’s movement. The strengthening U.S. dollar, along with President Trump’s confirmation of tariffs on Mexican and Canadian goods, is also affecting market sentiment, potentially increasing volatility in EUR/USD. 

Summary:

•  EUR/USD is testing key support at 1.0450 within an ascending channel, with resistance near 1.0522. 
• The price has bounced off the 100 and 200-period moving averages, indicating continued bullish momentum, but short-term volatility is rising. 
• Technical indicators show mixed signals, with RSI at 47 and Stochastic rebounding from oversold levels, suggesting potential short-term bullishness. 
• Fundamental factors, including ECB decisions and U.S. economic data, are influencing the pair’s movement, with key macro events ahead.