This week’s important events include the ECB interest rate decision on Thursday, along with US unemployment claims and key labor data from both the US and Canada on Friday.
EURUSD has recovered strongly from its January low, supported by a combination of bullish technical signals. These suggest the pair could continue higher, though traders will be watching key support and resistance levels closely.
On the fundamentals side, the ECB is expected to cut rates again as inflation slows and economic growth weakens. At the same time, Germany’s plans for higher defense spending reflect a broader shift toward investment in Europe, boosting confidence in the region’s economic outlook.
Overview
This week’s important events include the ECB interest rate decision on Thursday, along with US unemployment claims and key labor data from both the US and Canada on Friday.
EURUSD has recovered strongly from its January low, supported by a combination of bullish technical signals. These suggest the pair could continue higher, though traders will be watching key support and resistance levels closely.
On the fundamentals side, the ECB is expected to cut rates again as inflation slows and economic growth weakens. At the same time, Germany’s plans for higher defense spending reflect a broader shift toward investment in Europe, boosting confidence in the region’s economic outlook.
Key Economic Events
Thursday 15:15 (GMT+2) - Europe: Main Refinancing Rate (EUR)
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 15:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) - USA: Non-Farm Employment Change (USD)
Technical Analysis
After reaching a low point on January 13 at 1.01772, EURUSD experienced a significant recovery due to a combination of technical and fundamental factors. The appearance of a Hammer candlestick pattern indicated that sellers could not maintain downward momentum. Furthermore, the subsequent breakout above the 50-period Exponential Moving Average (EMA) provided early confirmation that control was shifting in favor of buyers.
From a technical perspective, the outlook for the pair has continued to improve. This is highlighted by the development of a bullish failure swing, where the uptrend was confirmed by price action. Additionally, the formation of a Golden Cross—where the 20-period EMA crossed above the 50-period EMA—reinforced a bullish sentiment.
Momentum indicators also support this optimistic view. The Momentum Oscillator has risen above the crucial 100 threshold, and the Relative Strength Index (RSI) remains above 50, indicating sustained buying interest. Moreover, the widening of Bollinger Bands, with prices closing above the upper band, signals a trend continuation.
Potential Upside Targets
If buyers maintain control of the market, traders may shift their focus to the following four potential resistance levels:
1.09613: The first level of resistance is determined at 1.09613, which reflects the 423.6% Fibonacci Extension drawn from 1.04419 to 1.02814.
1.10547: The second resistance level is observed at 1.10547, which aligns with the 261.8% Fibonacci Extension drawn from 1.05326 to 1.02099.
1.10748: The third price objective is projected at 1.10748, representing the 423.6% Fibonacci Extension drawn from 1.05279 to 1.03595.
1.15769: An additional price objective is projected at 1.15769, representing the 423.6% Fibonacci Extension drawn from 1.05326 to 1.02099.
Potential Downside Targets
If sellers take control of the market, traders may focus on the following four key support levels:
1.06681: The initial support level is estimated at 1.06681, representing the 23.6% Fibonacci Retracement drawn from the low point, 1.01772, to the high point, 1.08197.
1.05326: The second support level is determined at 1.05326, aligning with the peak from January 27.
1.04419: The third downside target is observed at 1.04419 corresponding to the peak marked February 5.
1.03130: An additional downside target is noted at 1.03130, reflecting the weekly support, S1, estimated using the standard Pivot Points methodology.
Fundamentals
The European Central Bank is expected to cut interest rates again this Thursday, lowering the key deposit rate by 0.25% to 2.5%. This would mark the sixth cut since mid-2024, as inflation eases and the eurozone economy weakens. With inflation expected to stabilize around 2% in 2025, economists anticipate further rate cuts later this year, especially as trade tensions with the US threaten to add more pressure to Europe’s struggling economy.
Europe is seeing rising borrowing costs, but this time it’s for a good reason. Germany is preparing to spend heavily, especially on defense, which requires taking on more debt. Unlike past financial scares, this reflects Europe’s efforts to invest in its own future.
Even countries like France and Italy, which often raise concerns, are managing to keep their financing costs stable. The euro has also strengthened against the dollar this year, showing growing confidence in Europe’s economic outlook. Overall, this is a healthier shift — driven by investment and growth, not by crisis.
Conclusion
In conclusion, EURUSD remains supported by improving technical signals and growing confidence in Europe’s economic outlook. While the currency pair shows potential for further gains, traders will closely monitor upcoming economic data and the ECB’s rate decision for fresh direction. With shifting monetary policy and increased European investment, the balance between economic risks and opportunities will continue to shape market sentiment in the weeks ahead.