EUR/USD remains within a contained range, slightly down in the 1.0630s, as geopolitical concerns ease and divergent interest rate expectations weigh on the pair.
Key Factors:
- Diverging Rates: Analysts expect USD to benefit from a more aggressive Fed stance compared to a potentially dovish ECB, creating downward pressure on EUR/USD.
- Hawkish Fed: Persistent US inflation, robust jobs market, and strong growth support higher-for-longer US interest rates.
- Dovish ECB: Easing European disinflation and weaker economic activity suggest a potential ECB rate cut in June.
- Analysts’ Views: Experts at Commerzbank predict a decline towards 1.0400, with bearish sentiment prevailing despite current stability.
Technical Analysis: Bear Flag Formation Signals Downside Potential
- Bear Flag Pattern: Recent price action suggests a potential Bear Flag formation, signaling further decline if the 1.0601 support breaks.
- Technical Targets: A break below 1.0601 could trigger a move towards the Fibonacci 0.618 target (1.0503), with potential further downside to 1.0446 or even 1.0403.
- RSI Signal: The RSI exiting oversold territory adds to the bearish sentiment.
- Bullish Resistance: Bulls need to overcome the 1.0700 resistance, followed by 1.0725 and 1.0800, to signal a potential recovery.