After another test of a strong support zone, EUR/USD has resumed its recovery, confirming the persistence of a medium-term uptrend. Buyers continue to defend the support area around 1.1600, while the rebound is developing amid growing expectations of tighter ECB policy.
The technical picture remains constructive: as long as support holds, the market views the current movement as a correction within a broader upward cycle rather than the beginning of a reversal.
Inflation increases pressure on the ECB
The main driver remains accelerating inflation in the eurozone. According to the latest data, the rate has risen to 3.2%, while core and services inflation are also increasing, indicating that price pressure is expanding beyond the energy sector. Against this backdrop, the market is almost fully pricing in an ECB rate hike at the June 11 meeting, with some participants already expecting additional tightening steps in the second half of the year.
Fundamental support for the euro remains
Another supportive factor for the euro is the expected narrowing of the policy gap between the Federal Reserve and the ECB. Many analysts anticipate a softer rate trajectory in the U.S., alongside a more cautious approach from the European regulator. This configuration is traditionally favorable for the euro and limits the downside potential of the pair, even amid weak economic growth in the eurozone.
Next key focus — ECB meeting
Ahead of the ECB decision, the market will likely remain highly sensitive to inflation data and comments from policymakers. If the expected rate hike is confirmed with hawkish rhetoric, the current rebound from support may extend further, with another attempt to move toward recent local highs. However, any signs of a more cautious ECB stance could trigger profit-taking following the euro’s recent recovery.
Near-term outlook
The current rebound toward resistance around 1.1640 should still be viewed as a selling opportunity with a potential retest of the 1.1600–1.1580 area. A break above resistance would open the way toward 1.1680–1.1700, where, as previously noted in Euro retreats as stronger dollar weighs on pair, selling pressure may also emerge.
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