Extreme Oversold Conditions Suggest a Bullish Correction in EURUSD

Central Bank

Economic

Summary:

The downside rejection from this zone triggered a highly extended move, which could now provide opportunities for an upward correction toward the 1.1474 area

BUY EURUSD

EXP

TRADING

1.13575

Entry Price

1.14750

1.12900

1.13629 +0.00048 +0.04%

0.0

Pips

Flat

1.12900

Exit Price

1.13575

Entry Price

1.14750

Economic data recently delivered some encouraging signs. Germany’s IFO Business Climate Index rose to 85.6 in June from the previous 85, matching market expectations. The Current Assessment Index outperformed forecasts, while the Expectations Index also registered a modest improvement. These figures confirm a gradual recovery in confidence within the Eurozone's largest economy.

Meanwhile, the Eurozone Composite PMI Output Index climbed by 1.0 point to 48.5, beating both internal expectations and the market consensus. This expansion was driven mainly by the services sector, while manufacturing output remained virtually unchanged.

Recent commentary from the European Central Bank (ECB) has also limited support for the single currency. ECB Chief Economist Philip Lane stated that uncertainty remains elevated despite the improving geopolitical outlook in the Middle East. He also warned that inflation could stay above the 2% target until the first half of 2027. His remarks reinforce expectations that the ECB will maintain a cautious approach over the coming months.

On the geopolitical front, crude oil prices have fallen significantly over the past month, hitting a new low since early March this Wednesday amid the resumption of traffic through the Strait of Hormuz. In fact, an Iranian military source told the Fars news agency that a limited number of vessels are being allowed to pass through the strait daily, in coordination with the Islamic Revolutionary Guard Corps Navy.

Additionally, the U.S. Department of the Treasury issued a temporary 60-day sanctions waiver authorizing the production, delivery, and sale of Iranian crude oil, petroleum products, and petrochemicals. This development eases global supply concerns and keeps downward pressure on oil prices, helping to mitigate upside pressure on consumer inflation.

Concurrently, investors have significantly increased their bets that the U.S. central bank will raise borrowing costs by at least 25 basis points (bps) in 2026, following the Fed's hawkish signal last week. Nine out of nineteen Fed committee members believed they would need to hike the policy rate to combat inflation. Adding to this, the new Fed Chair, Kevin Warsh, focused heavily on price stability during the post-meeting press conference, suggesting that the central bank might not rush to cut interest rates even in the face of slowing growth. Extreme Oversold Conditions Suggest a Bullish Correction in EURUSD_1

Extreme Oversold Conditions Suggest a Bullish Correction in EURUSD_1

Technical Analysis

EURUSD has experienced a persistent downward move with almost no pullbacks since the current swing began at the 1.1622 level, dropping to a session low of 1.1325. Near the origin of this bearish move, the 100 and 200-period moving averages appear aligned with the descending trendline. These averages currently sit at 1.1531 and 1.1594, respectively. The downside rejection from this zone triggered a highly extended move, which could now provide opportunities for an upward correction toward the 1.1474 area—a level hosting the 0.50 Fibonacci retracement and a minor resistance. If the moving averages realign with the trend in this zone, the bearish momentum could easily resume.

Looking at the oscillators, the RSI has dropped to the 16 level, entering extreme oversold territory. This is likely to attract potential buyers and add pressure from short-sellers taking profits. Meanwhile, the MACD shows a bearish histogram that has lost much of its depth, suggesting an upside crossover appears imminent. Similarly, while the signal lines are deeply embedded in negative territory, this depth reinforces the view that any potential upward move will likely be purely corrective.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1356

Target price: 1.1475

Stop loss: 1.1290

Validity: Jul 07, 2026 15:00:00

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Extreme Oversold Conditions Suggest a Bullish Correction in EURUSD

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