EUR/USD breaks through the 1.1735 support level. Can the bulls continue to push higher? Let's see how technical and fundamental factors align.

The US dollar weakened for the second consecutive day, with EUR/USD regaining ground in the Asian session. On Tuesday, EUR/USD attracted buying near 1.1710, continuing the strong rebound from the previous day’s low of 1.1660 (close to a four-week low). Currently, the spot price hovers around 1.1735, up 0.10% for the day.

Divergence in Fed Policy Shift and ECB Stance as Key Drivers

The US dollar index has been steadily retreating from its high on December 10, driven by market adjustments in expectations for Federal Reserve (Fed) policy. As the probability of rate cuts increases, the dollar’s attractiveness diminishes. Meanwhile, markets are betting that the European Central Bank (ECB) will keep interest rates steady, creating a policy divergence that provides tangible support for the euro and serves as the fundamental driver behind the EUR/USD rebound.

Multiple Technical Signals Confirm Upward Momentum

Key Support and Resistance Levels

The 1.1735 level consolidates several technical support signals. The 100-hour simple moving average (SMA) and the 50% Fibonacci retracement of the decline from 1.1808 to 1.1660 converge here, indicating that this support level is not coincidental but rather a resonance of multiple technical factors.

Divergence in Indicators Suggests Bullish Momentum

On the momentum front, the MACD (Moving Average Convergence Divergence) has turned positive and continues to rise, a classic bullish signal indicating that upward momentum is building. The Relative Strength Index (RSI) stands at 59, indicating moderate upward movement but not yet overbought, leaving room for further gains.

Next Key Observation Points

If EUR/USD continues to break higher, the next resistance level is at the 61.8% Fibonacci retracement, around the mid-1.1700s. A break above this level would further confirm the legitimacy of the rebound and could lead to a more solid upward trend.

Conversely, if the bulls encounter resistance here, EUR/USD risks being confined within recent trading ranges, potentially triggering a new round of consolidation.

Note: This analysis was generated with the assistance of AI tools.