Bullish Rebound Could Emerge from Deep Oversold Conditions

Central Bank

Economic

Summary:

While oversold conditions alone do not guarantee a reversal, they do suggest that downside momentum may be becoming stretched.

BUY EURUSD

EXP

TRADING

1.13700

Entry Price

1.15140

1.13100

1.13929 +0.00101 +0.09%

0.0

Pips

Flat

1.13100

Exit Price

1.13700

Entry Price

1.15140

U.S. Treasury Secretary Scott Bessent stated on Wednesday that the United States and China have agreed to extend their bilateral trade truce until January 10. The agreement was originally scheduled to expire in November and follows an unplanned meeting in Washington between Bessent and Chinese Vice Premier He Lifeng.

“ We will extend what we call the Busan Agreement — the economic de-escalation arrangement between the two countries that was due to expire on November 10 — until January 10,” Bessent said. The extension is being viewed as a positive step toward maintaining stability in trade relations between the world’s two largest economies.

Economic data from the United States also continued to support the view of a resilient economy. The preliminary S&P Global Composite PMI rose to 58.4 in September from 56.0 in August. Manufacturing activity improved to 57.0, comfortably above expectations of 53.5, while the Services PMI climbed to 58.7 compared with forecasts of 56.0. Both indicators also showed improvement relative to the previous month, reinforcing evidence of continued economic expansion.

From the monetary policy front, St. Louis Federal Reserve President Alberto Musalem stated that interest rates may still need to move higher in order to contain inflationary pressures originating from both demand and supply-side factors. He warned that without additional tightening, inflation could remain materially above the Federal Reserve’s 2% target over the next 18 months. Musalem also argued that gradual and earlier rate increases would be preferable to delaying action and eventually requiring larger adjustments.

Boston Federal Reserve President Susan Collins echoed concerns regarding inflation risks, highlighting renewed tensions in the Middle East as an important factor behind her support for last week’s federal funds rate increase. Her comments reinforced concerns that geopolitical developments could continue contributing to inflation through higher energy prices and broader supply-chain disruptions.

Meanwhile, Chicago Fed President Austan Goolsbee stated that he remains confident in the Federal Reserve’s ability to guide inflation back toward the 2% target, provided there is no renewed evidence of excessive demand across the economy. He also noted that lower interest rates could become appropriate in the future if inflation shows convincing signs of returning sustainably toward target levels.

In Europe, the latest Eurozone PMI figures released earlier on Wednesday also exceeded market expectations and remained firmly within expansionary territory. The stronger data continues to support the possibility that the European Central Bank may need to consider additional policy tightening if inflationary pressures remain persistent.

ECB policymaker Joachim Nagel stated that interest rates are still situated within neutral territory and suggested that a move toward “moderately restrictive territory” cannot be ruled out. Nagel emphasized that he remains concerned about inflation, noting that core price pressures continue to run above desired levels. However, he added that he has not yet observed significant second-round inflation effects resulting from higher oil prices. Bullish Rebound Could Emerge from Deep Oversold Conditions_1

Bullish Rebound Could Emerge from Deep Oversold Conditions_1

Technical Analysis

EURUSD recently declined toward the 1.1371 level, an area that had not been visited since July 28. This same support zone previously served as the starting point of a strong bullish advance, making it a technically important level once again. If buyers defend the area successfully and a similar reaction develops, the pair could begin a corrective move higher from current levels.

A potential recovery could initially target the 1.1514 region, where local resistance is located. This area also aligns closely with the 0.50 Fibonacci retracement level at 1.1512, increasing its technical relevance. In addition, the 100-period and 200-period moving averages are currently positioned at 1.1551 and 1.1544 respectively. As price begins to recover, these moving averages could converge with the resistance area, creating a cluster of technical levels that may attract price action toward that zone.

Looking at momentum indicators, the Relative Strength Index (RSI) recently declined to 20, placing it firmly within oversold territory. Readings at such extreme levels often increase the probability of a corrective rebound, particularly when they occur near an important support zone. While oversold conditions alone do not guarantee a reversal, they do suggest that downside momentum may be becoming stretched.

Meanwhile, the MACD continues to display a bearish histogram that has gained some depth during the recent decline, reflecting the strength of the downside move. The signal lines also remain deeply embedded in bearish territory, indicating that sellers continue to hold short-term control of momentum. For now, any upside move should be viewed as a corrective rebound within the current bearish phase unless broader momentum indicators begin showing stronger evidence of a sustained shift in direction.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1370

Target price: 1.1514

Stop loss:1.1310

Validity: Oct 06, 2026 15:00:00

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Bullish Rebound Could Emerge from Deep Oversold Conditions

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