Rapid Recapture of Local Support Paves the Way for Bullish Resumption

Forex

Economic

Summary:

While the signal lines ar.e currently oscillating just beneath the neutral threshold, a confirmed bullish histogram transition would easily propel them back into positive territory

BUY EURUSD

EXP

TRADING

1.16562

Entry Price

1.18200

1.15600

1.16215 -0.00342 -0.29%

0.0

Pips

Flat

1.15600

Exit Price

1.16562

Entry Price

1.18200

United States President Donald Trump is scheduled to swear in Kevin Warsh as the next Chairman of the Federal Reserve this Friday at the White House, according to a senior administration official speaking to CNBC on Monday. This crucial institutional transition follows a decisive vote by the U.S. Senate last week, which confirmed Warsh to succeed the current interim Federal Reserve Chairman, Jerome Powell, for a full four-year term officially commencing this coming Friday. Chairman-elect Warsh is poised to assume leadership in a challenging macroeconomic environment characterized by intense political pressure from the Trump administration. Since the inception of his second presidency, Trump has aggressively advocated for aggressive interest rate reductions, despite the fact that recent high-frequency data reveals the domestic disinflationary process has completely reversed its course.

Specifically, economic prints from last week demonstrated that the U.S. Consumer Price Index (CPI) accelerated to 3.8% year-over-year in April, while the Producer Price Index (PPI) surged by 6%. Consequently, money markets have entirely capitulated on near-term rate cut expectations; instead, current LSEG data illustrates that market participants are actively pricing in a potential interest rate hike toward the tail end of the year to combat sticky supply-side inflation. On the geopolitical front, systemic risk remains highly elevated as President Trump threatened Iran with imminent military action should Tehran fail to negotiate a comprehensive diplomatic agreement. This warning follows a severe escalation in which the Islamic Republic targeted a nuclear facility in the United Arab Emirates (UAE), while an Iranian-aligned Iraqi militia struck strategic objectives inside Saudi Arabia. Bond investors are increasingly unnerved by the specter of surging global inflation driven by ongoing maritime friction within the critical Strait of Hormuz and the corresponding spike in crude oil prices.

However, in a notable development on Monday, Trump stated via Truth Social that he has ordered a temporary pause on a U.S. military strike originally scheduled for Tuesday, following direct appeals from the leadership of Qatar, Saudi Arabia, and the UAE. While Trump noted that "serious negotiations" are currently underway, he explicitly warned that the U.S. remains fully prepared to execute a comprehensive, full-scale military assault against Iran if a diplomatic resolution is not swiftly secured.

Across the Atlantic, European Central Bank (ECB) President Christine Lagarde acknowledged at the commencement of the G7 Summit her profound concern regarding the aggressive fixed-income sell-off currently hammering global bond markets. Lending a hawkish baseline to the conversation, ECB Governing Council member Yannis Stournaras noted over the weekend that a modest increase in borrowing costs could effectively anchor inflationary expectations without inflicting systemic economic damage.

Concurrently, fellow policymaker Boris Vujcic stated on Friday that the definitive decision to raise interest rates during the June assembly remains strictly contingent upon forthcoming data streams. These comments suggest a growing institutional alignment toward imminent tightening to curb persistent Eurozone inflation expectations. Indeed, a recent Reuters poll revealed that 85% of economists now expect the central bank to implement a 25-basis-point hike to the deposit rate, bringing it to 2.25% in June—a massive upward shift from the narrow majority that anticipated such a move prior to the April policy meeting. Rapid Recapture of Local Support Paves the Way for Bullish Resumption_1

Rapid Recapture of Local Support Paves the Way for Bullish Resumption_1

Technical Analysis

From a technical perspective, EUR/USD drifted lower to test a vital local support floor at the 1.1632 handle, a level that holds significant technical weight as it aligns precisely with the 0.50 Fibonacci retracement of the recent upward expansion. This area is proving to be a critical battleground for market participants, tracking in ultra-close proximity to the 100-period Moving Average (MA) located at 1.1646. Although sellers managed to briefly trigger a downside breach earlier in the session, the breakdown was rapidly rejected by the market. Bulls swiftly recaptured the lost territory, pushing price action back above the 100-period MA. This strong intraday reclamation suggests that a renewed bullish impulse may be brewing, targeting a potential run toward the primary structural resistance ceiling at 1.1823. Meanwhile, the 200-period Moving Average is currently tracking at 1.1703, and a decisive daily close above this structural barrier would likely accelerate the pair's upward momentum.

Our analysis of momentum oscillators heavily supports this nascent upward pivot from structural demand. The Relative Strength Index (RSI) recently dipped to the 34 level, nearing oversold extremes and alerting deep-value buyers to a highly compressed market condition before stalling its descent. Simultaneously, the MACD is printing a bearish histogram, but its negative bars are losing depth with significant velocity, rendering an upside momentum crossover highly probable in the near term. While the signal lines are currently oscillating just beneath the neutral threshold, a confirmed bullish histogram transition would easily propel them back into positive territory, validating a more sustainable bullish expansion. Conversely, traders should remain cautious, as a decisive daily close beneath the 1.1632 structural support floor would completely deflate the bullish thesis, opening the floodgates for a deeper bearish continuation toward lower structural targets.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1656

Target price: 1.1820

Stop loss: 1.1560

Validity: May 29, 2026 15:00:00

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Rapid Recapture of Local Support Paves the Way for Bullish Resumption

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