EUR/USD struggles to break away from the key area of 1.1735 - positive signals mixed with uncertainty

Increasing Purchasing Power Amid Dollar Weakness

The EUR/USD pair continues to attract buyers near 1.1710 in the late Asian session, driven by strong rebound momentum day after day. The nearly four-week range around 1.1660 is now being challenged, with the spot price trading at 1.1735, up 0.10% since the market open, indicating potential for further gains. The US dollar remains in its second consecutive day of weakness, moving away from the highs touched in early December on Monday.

Policy Outlook Supports Upward Movement

A key factor comes from the differing stances of these central banks. The dovish expectations from the US Federal Reserve suggest that the Fed may pause its tightening cycle, supporting a weaker dollar. Meanwhile, bets that the European Central Bank will maintain its current policy stance seem to directly bolster the euro. The widening divergence between these two forces indicates a bullish outlook for EUR/USD in the near term.

Key Levels to Watch on the Chart

Looking at the hourly chart, the confluence zone at 1.1735—located at the 100-hour simple moving average and the 50% Fibonacci retracement level from the decline of 1.1808 to 1.1660—becomes a critical point. A break above this area would confirm that buying interest remains stronger than selling pressure.

Momentum indicators show a clear picture. The MACD (Moving Average Convergence Divergence) has turned positive and continues to rise, signaling improving bullish momentum. The RSI (Relative Strength Index) stands at 59, showing no signs of overbought conditions and leaving room for potential upside.

Targets and Risks for Traders

The 61.8% Fibonacci retracement level in the mid-1.1700s will serve as the next resistance. If the price can break through this zone, it would confirm a strong bullish trend. Conversely, failure to surpass these levels could lead EUR/USD to form a new consolidation pattern within the recent range.

Traders should note that commissions are costs to consider when entering positions. This analysis is provided to assist in decision-making.