The EUR/USD currency pair is showing a resilient, sentiment-led recovery, extending gains as traders await key central bank announcements from the Federal Reserve and the European Central Bank. Technical analysis from Scotiabank indicates the pair has breached a significant descending trendline that had capped rallies since Q4 2024 and moved above the 50-day and 100-day simple moving averages, which now act as dynamic support.
A critical chart pattern under observation is the potential formation of an inverse head and shoulders pattern on the daily timeframe, with its neckline near the 1.0950 level. A decisive weekly close above this threshold could technically open a path toward the 1.1100–1.1150 resistance zone. Momentum indicators like the RSI have climbed from oversold into neutral territory, suggesting waning selling pressure.
The recovery is fundamentally driven by a shift in market psychology. Recent Eurozone data shows tentative signs of stabilization, leading to a subtle recalibration of expectations for ECB rate cuts. Meanwhile, stubborn U.S. inflation data has caused markets to price in a more delayed easing cycle from the Fed, temporarily narrowing the policy divergence gap and removing a tailwind from the US dollar.
The immediate market focus is on the Fed's interest rate decision and subsequent ECB commentary, which are poised to significantly influence the pair's direction. Traders are also noting that the move is being fueled in part by a covering of extreme net short speculative positions, creating a short-squeeze effect. Analysts caution that without a confirmed break above 1.1100, the current move may represent a range expansion rather than the start of a sustained bull trend.
