Potential for a Deeper Pullback Builds After Triple Tap on Resistance

Summary:

This latest rejection coincides with a temporary easing of trade tensions, which could lend medium-term support to the U.S. dollar.

SELL EURUSD

EXP

EXPIRED

1.14200

Entry Price

1.09500

1.16200

1.16409 -0.00148 -0.13%

Pips

EXPIRED

1.09500

1.13296

Exit Price

1.14200

Entry Price

1.16200

The European Central Bank (ECB) appears firmly on course to deliver its eighth rate cut within a twelve-month period, marking its seventh consecutive reduction. This growing conviction among market participants reflects the belief that inflation in the euro area is gradually converging toward the ECB’s 2% target by the end of the year. In parallel, the possibility of further economic headwinds, especially due to tariffs imposed by U.S. President Donald Trump, has added to expectations that the central bank will continue loosening policy in the coming months to shield the fragile recovery.

In recent weeks, several ECB policymakers have spoken publicly in favor of maintaining an accommodative approach, noting that inflation remains vulnerable to downside risks. Their statements reveal a strong consensus within the Governing Council to act preemptively rather than reactively, as the eurozone continues to navigate both structural weaknesses and external shocks. Against this backdrop, market speculation has intensified, with many analysts now expecting the ECB to deliver additional stimulus sooner rather than later to prevent deflationary pressures from becoming entrenched.

Meanwhile, prospects for a near-term trade agreement between the United States and the European Union appear to have dimmed. Speaking during Tuesday’s European session, EU Trade Commissioner Maros Sefcovic emphasized that the bloc is actively strengthening its relationships with other trading partners—who collectively represent 87% of the EU’s exports—according to The Straits Times. When pressed about the status of U.S.-EU trade talks, Sefcovic reiterated the EU’s commitment to reaching a fair and balanced deal but pointed to Washington’s lack of meaningful engagement as a key obstacle to progress.

Across the Atlantic, President Trump on Thursday described what he called a major breakthrough in trade relations with the United Kingdom and suggested that tariffs on Chinese goods might be eased ahead of the upcoming round of high-level U.S.-China negotiations. At the same time, he renewed his criticism of Federal Reserve Chair Jerome Powell, highlighting once again the friction between the White House and the central bank over monetary policy direction.

Despite mounting political pressure, the Federal Reserve opted on Wednesday to leave interest rates unchanged for the third straight meeting. Citing growing economic uncertainty, the central bank maintained a cautious tone, pushing back against calls from the administration for more aggressive easing.

Fed Chair Jerome Powell, during his press conference, underscored the central bank’s data-dependent approach, noting that policymakers intend to proceed with patience as they monitor the effects of trade policy on inflation and employment. “There is no need to act hastily,” Powell said, pointing to the unpredictable nature of ongoing trade negotiations and their potential macroeconomic implications.

“We simply can’t forecast how this situation will evolve,” he acknowledged, while noting that the overall level of uncertainty remains unusually elevated. Powell reaffirmed that the Fed is prepared to respond as needed but stressed that the current stance remains appropriate given the available data.

The Federal Open Market Committee (FOMC) voted unanimously to keep the federal funds rate within its target range of 4.25% to 4.50%—a level last established in late 2024 following a full percentage point reduction during the previous autumn. In its post-meeting statement, the Fed conceded that economic uncertainty had “increased further,” even as the underlying pace of growth remains “solid,” albeit distorted by volatility in net export data during early 2025. Potential for a Deeper Pullback Builds After Triple Tap on Resistance_1

Potential for a Deeper Pullback Builds After Triple Tap on Resistance_1

Technical Analysis

EURUSD has recently tested the upper boundary of a rising resistance line for the third time, encountering renewed selling pressure at this level. This latest rejection coincides with a temporary easing of trade tensions, which could lend medium-term support to the U.S. dollar. If the local resistance around 1.1420 once again proves difficult to breach, the pair could be poised for a deeper pullback, with the next major support level situated near 1.0950.

The 100-period and 200-period moving averages are currently located at 1.0723 and 1.0791, respectively, and have shown a sideways trend since the beginning of the year. This technical behavior suggests that price could be magnetized back toward this consolidation zone. Adding to this bearish setup, the daily Relative Strength Index (RSI) recently reached 77, signaling clear overbought conditions and potentially attracting dollar buyers seeking to rebalance.

Notably, the 0.50 and 0.618 Fibonacci retracement levels lie just above these long-term moving averages, reinforcing the likelihood of a corrective move toward that zone. However, should EURUSD manage to post a new local high above current resistance, the bearish outlook would be invalidated, opening the door to a renewed upside extension.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1420

Target price: 1.0950

Stop loss: 1.1620

Validity: May 21, 2025 15:00:00

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Potential for a Deeper Pullback Builds After Triple Tap on Resistance

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