Usman Salis
The euro is flexing its muscles against the U.S. dollar following a decisive rally that pushed EUR/USD through several key resistance barriers. Market participants are zeroing in on the 1.20 handle - a historically pivotal level that will likely determine whether bulls can keep their foot on the gas or if bears are about to make their stand.
EUR/USD Builds Bullish Momentum
The 4-hour chart reveals a strong breakout after weeks of choppy sideways action. Price powered through the 1.1750–1.1780 consolidation zone before ripping through buy-stop liquidity clustered around 1.1918. According to trader fttc, while the bigger picture warrants some caution, the near-term trend is clearly tilted to the upside.
Back in late September, price dipped below prior lows near 1.1700 in what looked like a classic liquidity grab before reversing sharply - a textbook sign of buyer strength. That rejection from the demand zone gave bulls the green light, and they've been running with it ever since.
The surge past 1.1918 wasn't just noise - it confirmed serious buyer conviction. Now, all eyes are on the 1.20 psychological level, a major resistance zone on higher timeframes that could act as a magnet for profit-taking. While momentum favors more upside in the short run, this area has historically triggered reversals, so traders should stay alert for any signs of exhaustion.
What's Fueling the Euro?
A few key factors are lining up behind the euro's rally:
- U.S. Dollar Weakness: Markets are pricing in a more dovish Federal Reserve, with bond yields cooling off and weighing on the greenback.
- Eurozone Stability: Recent data out of the Eurozone has been relatively solid, giving the euro some fundamental support.
- Risk Appetite: A broader risk-on mood in markets is driving flows into currencies like the euro at the dollar's expense.
What to Watch Next
Traders should keep their focus on the 1.20 resistance zone in EUR/USD - this is where the real test begins. A clean break above could open the door for more gains, but a rejection here might be the signal that bulls have overextended. Watch for any weakening in momentum indicators or bearish divergence, which could hint that the EUR/USD rally is running out of steam. And of course, any surprises from the Fed or ECB could shift the entire picture in a hurry.
Usman Salis
