The euro staged a modest recovery against the US dollar on Wednesday, bouncing from the lower boundary of a descending channel pattern to test the 1.1550 resistance level. The move came as the greenback softened under mixed US economic data and shifting Federal Reserve policy expectations. Meanwhile, the single currency remained pinned below 0.8655 against the British pound after weaker-than-expected German industrial production data reinforced the eurozone's manufacturing recession.
Buyers stepped in near the 1.1450 support zone in EUR/USD, prompting a technical rebound that could extend to the channel's midpoint around 1.1580 if 1.1550 is cleared. However, failure to breach this level could send the pair back toward the channel floor. The broader trend remains bearish while the descending channel holds, analysts warned.
In the EUR/GBP cross, German industrial output contracted sharply for the third quarter, cementing expectations that the European Central Bank will maintain a dovish stance. The 0.8655 ceiling has capped the pair for two weeks and now coincides with the 50-day moving average, adding downside pressure. Sterling found support from expectations that the Bank of England will move cautiously on rate cuts due to sticky services inflation.
Market participants now look to upcoming US inflation data and the German ZEW economic sentiment index for fresh direction. The diverging policy paths between the Fed, ECB, and BoE continue to dominate price action, creating range-bound conditions in both currency pairs.
