EUR/USD Breaks Downtrend as US Rate Outlook Softens
The EUR/USD has broken out of its downtrend resistance after a recent intervention episode in Japan and market expectations for US Federal Reserve tightening were pared back. The pair extended its move, breaking above resistance at 1.1480 and the 50-day moving average to test the long-running downtrend that's been in place since late January.
The change in US rate outlook was a key factor, with markets reducing their expectations for Fed tightening by next June to around 42 basis points. Lower energy prices also improved the euro area outlook, as Europe is a major net energy importer and benefits from lower oil and gas prices compared to the United States.
The incoming flow of US economic data, including Friday's payrolls report, will be crucial in determining whether the breakout has legs. The Gulf region remains uncertain, with ongoing peace negotiations that could impact energy prices. If EUR/USD fails to build on its breakout and retracts back beneath the trendline, it would add to the sense that bears remain dominant.