EUR/USD Surges Amid Dollar Weakness – Can the Rally Sustain?

Summary:
• EUR/USD surges past 1.09 as dollar weakness fuels momentum. Can the rally continue, or will resistance levels stall gains?

EUR/USD has rebounded sharply, climbing above the 1.09 mark as dollar weakness fuels renewed upside momentum. The move comes after the pair bottomed near 1.04 earlier this year, signalling a potential shift in market sentiment. The question now: Can this rally be sustained, or will the euro face resistance at key levels?

Key Drivers Behind EUR/USD’s Upswing

1. Federal Reserve’s Dovish Tilt
   • Recent commentary from the Federal Reserve has suggested a more cautious approach toward further rate hikes.
2. Eurozone Economic Stabilization
   • A weaker U.S. dollar has supported the euro, improving sentiment for EUR/USD bulls.
3. Geopolitical and Market Risk Sentiment
   • Geopolitical tensions remain a wildcard, as energy supply disruptions or new macroeconomic shocks could reintroduce volatility into the FX market.

Technical Analysis: Key Levels to Watch

• Current Price: 1.0902
• Key Resistance Levels: 1.10, 1.12, 1.15
• Key Support Levels: 1.08, 1.06, 1.04
• Momentum Indicators:
  • The 50-day moving average has crossed above the 200-day moving average, a bullish signal.
  • RSI remains neutral, suggesting room for further upside before overbought conditions emerge.

Outlook: Will EUR/USD Sustain Its Momentum?

While the current rally is fueled by dollar weakness and improving European economic data, traders should remain cautious of upcoming risk events. U.S. economic data, particularly labour market strength and inflation trends, will play a decisive role in shaping Fed expectations. Additionally, any hawkish rhetoric from the ECB could further propel the euro.

For now, EUR/USD remains bullish short-term, but a decisive break above 1.10 will be crucial for continued upside. A failure to hold above 1.08 could see a retest of recent lows, making risk management essential for forex traders.