The EUR/USD pair is currently confined within a tight weekly range of approximately 70 pips, with the lower boundary positioned around 1.1765–1.1778 and the upper limit restricted in the 1.1830–1.1834 area. The market has been oscillating between 1.1790 and 1.1830, reaching an intraday peak of 1.1830, aligning with the 50% retracement of the latest swing and establishing a distinct intraday pivot point. The price dipped below the 200-hour moving average at 1.1801 earlier, yet demand resurfaced near the 100-hour moving average around 1.1793, establishing the range of 1.1790–1.1800 as a significant support zone. On the four-hour chart, the rally is encountering resistance precisely at the 100-period simple moving average near 1.1830, which now serves as the key trigger level: a decisive break and hold above 1.1830 would open the path to 1.1860 initially and 1.1889 subsequently. Immediate support is positioned at 1.1790, followed by 1.1760, which marks the origin of the last recovery leg. A firm close below 1.1760 would negate the short-term rebound and redirect attention to 1.1741 and the 100-day moving average near 1.1691. Momentum indicators indicate a positive yet not excessively stretched configuration. On the four-hour frame, RSI is positioned around 56, indicating a strengthening positive momentum that remains within a reasonable range, following a rebound from oversold conditions below 30 earlier this month. The MACD is positioned just above its signal line, accompanied by a modestly positive histogram, indicating a gradual transition from sellers to buyers instead of a sharp squeeze.
The recent price action has seen a notable compression in volatility, with the entire week’s movement restricted to approximately 70 pips, a range that is considered unusually narrow for this currency pair. Such compression around a pivot like 1.18 often signals an impending range expansion. Provided that the spot maintains its position above 1.1790 and the 1.1765–1.1778 support level stays secure, the bias within this compression zone leans towards an upward movement rather than a significant downturn. The present range of 1.1760–1.1830 is positioned within a broader uptrend that commenced when EUR/USD was valued around 1.08–1.09, with the spot fluctuating close to 1.0850 between the 50-day and 200-day moving averages. Since then, the pair has established a pattern of higher lows, underpinned by easing European inflation, shifting expectations for the European Central Bank, and a diminishing US rate advantage. The 100-day moving average at 1.1691 serves as the primary medium-term benchmark: provided this level holds during pullbacks, the overall structure maintains a bullish outlook. A sustained breakout above 1.1860 and then 1.1889 would validate that the upward movement from the 1.08 region remains intact and that the market is prepared to revisit the 1.19–1.20 range once more.
The inflation situation in the Euro area has transitioned from a crisis-level issue to a phase of controlled disinflation. Headline eurozone CPI has decreased from approximately 10.6 percent in late 2022 to close to 2.4 percent by early 2025, while core inflation has moderated from around 5.0 percent to about 2.1 percent. Projections for Germany in February 2025 indicate a headline CPI of approximately 2.3 percent year-over-year, a decrease from 2.5 percent, while the harmonised CPI is expected to be close to 2.4 percent, with the core CPI around 2.2 percent. Services inflation continues to be high, sitting at approximately 3.1 percent in Germany and around 3.3 percent across the bloc, whereas energy prices are slightly in the negative territory. In this context, the ECB has maintained the deposit rate at 3.75 percent since September 2024, indicating that the phase of rate increases has concluded, while any potential cuts will be contingent on forthcoming data. Markets are currently anticipating approximately 75 basis points of cuts from the ECB for 2025, in contrast to around 50 basis points for the Federal Reserve. This slight divergence is insufficient to trigger a significant sell-off in EUR/USD; however, it does limit the potential for aggressive rallies in the euro when US data exceeds expectations.
Germany continues to serve as the primary indicator of inflation within the eurozone, representing approximately 29 percent of the region’s GDP. The market anticipates that the German CPI will register approximately 2.3 percent year-over-year, while the harmonised CPI is projected to be close to 2.4 percent. Historically, when German CPI diverges by more than 0.2 percentage points from consensus, EUR/USD frequently experiences 50–80-pip fluctuations in the following hours. A lower figure, such as 2.1 percent compared to 2.3 percent, would heighten expectations for more immediate or substantial ECB rate cuts and could exert initial pressure on EUR/USD. Should the release be viewed as a clear sign of disinflation without harming growth, the medium-term implications could indeed bolster the euro by reducing risk premiums. A reading that exceeds expectations at 2.5 percent or higher would delay the timing of cuts, likely providing an immediate boost to EUR/USD as rate spreads shift in favor of the euro. However, this could also raise concerns about prolonged restrictive policy, potentially impacting European growth negatively in the future. With the pair currently situated just below 1.1830, this data point is strategically positioned to determine if the 70-pip range will finally be breached.