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The EUR/USD pair was holding steady earlier on Monday, at 1.1356, reflecting a cautious but optimistic market mood. The pair is trading at 1.1390, up 0.26%, at the time of writing. Hopes for a de-escalation in trade tensions have sparked renewed confidence, halting the US Dollar’s recent slide. With critical economic data looming, the pair’s next move hinges on upcoming releases and technical signals. Here’s why the stage is set for a potential bullish breakout and what to watch in the days ahead.
Trade War Thaw Fuels Market Optimism
Easing trade war fears have shifted market dynamics, bolstering risk appetite and stabilizing the US Dollar. Recent dovish remarks from Federal Reserve Chair Jerome Powell and other officials suggest a relaxed stance on inflation and economic risks. This has paradoxically supported the Dollar, as markets interpret it as a signal of steady policy rather than weakness. However, the Euro remains resilient, buoyed by expectations of balanced growth across the Eurozone. If trade talks progress, the EUR/USD could gain momentum, particularly if it breaches the 1.1400 resistance.
Key Data to Drive Volatility
This week’s economic calendar is packed with first-tier releases that could jolt the EUR/USD out of its current range. On Wednesday, the US and Eurozone will unveil updates on inflation, employment, and growth—data that will shape monetary policy expectations. Markets are particularly focused on Eurozone inflation, as persistent price pressures could strengthen the European Central Bank’s hawkish resolve under President Christine Lagarde. Meanwhile, US employment figures will test the Federal Reserve’s dovish tilt. With Labor Day closures on Thursday limiting trading, Wednesday’s releases are likely to trigger sharp moves.
Technical Setup: Bullish Potential Awaits Confirmation
From a technical perspective, the EUR/USD is primed for an upward breakout. The daily chart shows the pair trading well above its moving averages, with the 20 Simple Moving Average climbing sharply at 1.1200. Technical indicators, while flat, remain in positive territory, signaling latent bullish momentum. The critical level to watch is 1.1400, where sellers have capped gains. A decisive break above this threshold could unleash buyer enthusiasm, targeting 1.1500 or higher. Conversely, failure to breach 1.1400 may see the pair retreat toward 1.1300.
What Lies Ahead
The EUR/USD’s path depends on this week’s data and trade developments. A bullish breakout above 1.1400 seems plausible if Eurozone inflation surprises to the upside or trade tensions ease further. However, stronger-than-expected US data could bolster the Dollar, keeping the pair range-bound. Traders should brace for volatility on Wednesday and monitor technical levels closely. For now, the pair’s upside bias and improving market sentiment suggest opportunity, but confirmation is key.
