The EUR/USD exchange rate is showing signs of renewed bullish momentum after forming a technical “cup and handle” pattern, a classic bullish continuation signal often observed ahead of breakout rallies.
While the macroeconomic environment remains fluid, shaped by geopolitical instability, Federal Reserve policy shifts, and ongoing trade negotiations, the chart pattern suggests the pair could be primed for further upside, particularly if upcoming U.S. inflation data aligns with market expectations. TelaraX‘s team provides a well-rounded exploration of the subject in this piece.
Trade and Tariff Uncertainty Fuels Volatility
As of Thursday morning, the EUR/USD pair was trading near 1.0930, retreating from its year-to-date high of 1.1147. This pullback follows a period of elevated market volatility, spurred by sudden changes in U.S. trade policy, particularly the adjustment of tariff schedules.
While certain non-retaliating countries–including some within the European Union–received temporary tariff relief, this was offset by a significant escalation in tariffs on Chinese goods, raised to 125%. The combination of trade concessions and aggressive trade barriers created a conflicted narrative, disrupting investor confidence and contributing to short-term exchange rate swings.
This duality in policy–easing toward allies while escalating pressure on strategic competitors–added a layer of uncertainty to the FX markets, prompting cautious positioning and range-bound trading behavior in major currency pairs.
Fed Minutes and Rising Stagflation Concerns
The release of the Federal Reserve’s FOMC meeting minutes on Wednesday provided further context. Policymakers opted to hold interest rates steady, signaling a data-dependent strategy moving forward. The accompanying dot plot illustrates that the Fed still expects to deliver two interest rate cuts by year-end 2025.
However, emerging stagflation concerns–a mix of stubborn inflation and slowing growth–have begun to shift sentiment. Stagflation complicates monetary policy decisions, as stimulus efforts risk fueling further inflation while tightening could suppress already weak economic activity.
The next major catalyst for the EUR/USD will be Thursday’s U.S. Consumer Price Index (CPI) data. Analysts expect a decline in headline CPI from 2.8% in February to 2.6% in May, with core CPI dropping to 3.0%.
A meaningful disinflationary print, especially alongside falling crude oil prices, could increase the likelihood of up to three Fed rate cuts–more than the previously forecast two.
Technical Analysis: Bullish Cup and Handle Pattern
From a technical analysis perspective, EUR/USD has been in a clear uptrend since early January, rallying from 1.0180 to a recent high at 1.1147. This move has been underpinned by a stronger eurozone macro backdrop and broad-based dollar weakness, especially as U.S. real yields decline.
A well-defined cup and handle formation is visible on the daily chart. This setup typically marks a bullish continuation pattern, where the rounded bottom (the cup) is followed by a slight downward or sideways consolidation (the handle) before a resumption of the prior uptrend.
The handle structure currently shows shallow retracement, suggesting strong buyer conviction and limited profit-taking.
Additionally, the EUR/USD pair continues to trade above its 50-day simple moving average (SMA), a widely recognized support level that reinforces the underlying bullish structure. Momentum indicators further validate this outlook, with the Relative Strength Index (RSI) hovering in neutral-to-bullish territory around 55-60–comfortably below overbought thresholds–signaling there is still room for upward movement.
Moreover, both the MACD and recent moving average crossovers align with a continued bullish bias, suggesting that the pair retains positive momentum as it consolidates within the handle phase.
A confirmed breakout above 1.1147 would likely trigger a wave of buy-side momentum, attracting trend-followers, algos, and technical traders. On the other hand, a drop below the 50-day moving average would be a bearish invalidation, potentially signaling short-term downside risk.
Key technical levels to watch for the EUR/USD pair include two critical short-term support zones: 1.0860, which aligns with the 50-day moving average, and 1.0780, marking the recent low of the handle formation. On the upside, resistance levels are found at 1.1147–the current neckline and the 2025 high–and 1.1200, a notable psychological barrier that may attract profit-taking.
Should a breakout occur, the bullish price target is projected near 1.1667, derived from the cup and handle pattern‘s measured move, suggesting significant upside potential if bullish momentum is sustained.
Conclusion
The EUR/USD currency pair is at a technical crossroads, driven by a complex mix of fundamental and technical forces. While tariff realignment, central bank policy, and CPI expectations provide a fluid macro backdrop, the technical configuration–notably the bullish cup and handle pattern–stands out as the dominant signal.
If the U.S. inflation data supports the case for monetary easing, and if the pair successfully closes above 1.1147, a new bullish leg could extend toward the 1.1667 level over the coming weeks.
Traders should remain tactically flexible, using risk management tools, and monitor economic data releases, central bank commentary, and technical indicators to navigate the evolving FX landscape.
COMTEX_465026221/2922/2025-04-29T04:18:28
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