The EUR/USD currency pair is experiencing a modest rally, with the Euro gaining 0.2% as it enters Thursday’s North American session, according to Scotiabank strategists Shaun Osborne and Eric Theoret [1]. This upward movement is attributed primarily to improved market sentiment, which has offset softer expectations for European Central Bank (ECB) tightening. The strategists note that while stronger German factory orders and resilient Eurozone retail sales have provided some support, the dominant factor driving the Euro's recovery is broader risk sentiment rather than fundamental economic data [1].
Expectations for ECB policy tightening have moderated, with June now priced for 19 basis points and September just shy of 50 basis points, indicating a notable reduction in anticipated rate hikes [1]. Despite this, the technical outlook for EUR/USD remains bullish. Key support is identified in the mid-1.16s, and the next major upside target is the 61.8% Fibonacci retracement level at 1.1825. A break above this level could pave the way for a full retracement and a push back above 1.20 [1].
Scotiabank strategists suggest that in the near term, EUR/USD is likely to trade within a range of 1.1720 to 1.1820 [1]. The current rally is described as sentiment-led, with technical indicators supporting a bullish bias despite the erosion of fundamental support from central bank policy expectations [1].
CONCLUSION
The EUR/USD is benefiting from improved market sentiment, which is driving a modest rally despite softer ECB tightening expectations. Technical analysis points to a bullish outlook with a key upside target at 1.1825, while the pair is expected to remain range-bound in the near term. Market participants are closely watching sentiment and technical levels for further direction.