The EUR/USD began the U.S. session with a break above the 200-hour moving average at 1.05203, signaling bullish momentum. The rally pushed the price through the 38.2% retracement level at 1.05628, but it quickly pulled back, dipping below yesterday's high of 1.0544.
However, the decline found support above the 200-hour moving average, allowing the pair to snap back higher. Heading into the London close, the price reached a new session high of 1.0587, but subsequent hourly candles have shown lower highs, bringing the pair back to test support at the 38.2% retracement.
So far, buyers have managed to defend the 1.05628 level, with the price holding just above it at the time of writing. For bullish momentum to continue, this support level needs to hold, followed by a move higher toward the next swing resistance at 1.05926. Beyond that, the key swing area between 1.0600 and 1.06097 would come into focus as the next upside target. A failure to hold the 38.2% retracement, however, could dampen the bullish outlook.
Fundamentally, earlier today, ECBs Schnabel spoke with more hawkish tones which helped propell the pair higher:
Schnabel indicated that there is limited scope for further rate cuts, suggesting a gradual move toward neutral rates (estimated to be in the range of 2-3%) rather than lowering them further. Schnabel emphasized that the ECB should not adopt an overly accommodative stance and prefers a gradual approach to rate adjustments. She highlighted the need to see services inflation decline, while also noting that the impact of previous tightening measures is diminishing. Schnabel believes current rates may already be close to neutral, with the economy showing signs of stagnation but no immediate risk of recession.
In the US session the lower yields drove the USD lower. The 10 year yield is down -5.6 basis points. The 7 year note auction was met with strong demand was also helped to weaken the greenback.