The EUR/USD currency pair is currently experiencing persistent downward pressure as bearish traders maintain significant control beneath the crucial technical confluence zone of 1.1780-1.1770. This level holds vital implications for global currency markets and international trade flows in the early stages of 2025.
This specific range serves as a convergence point for multiple technical indicators that have historically functioned as both support and resistance. The breakdown of this area is particularly noteworthy for analysts observing the economic divergence between the Eurozone and the United States.
Technical Analysis of EUR/USD
Technical analysts have pinpointed the 1.1780-1.1770 area as a critical confluence zone due to its combination of several significant chart elements. Firstly, this range aligns with the 61.8% Fibonacci retracement level from the 2024 rally. Secondly, it corresponds with the 200-day moving average, a widely regarded long-term trend indicator. Lastly, this zone includes a previous swing high from November 2024 that has now transitioned into resistance.
The inability of the pair to reclaim this territory signifies ongoing weakness. Observers note that the EUR/USD has tested this confluence zone on three separate occasions since January 2025, with each attempt resulting in rejection. The most recent rejection occurred on March 15, when the pair briefly touched 1.1782 before declining sharply, illustrating consistent selling pressure at elevated levels.
Market Sentiment and Economic Divergences
Volume analysis indicates increasing selling pressure during declines, contrasting with less buying interest during rallies. The Relative Strength Index (RSI) currently registers at 42 on the daily timeframe, remaining under the neutral 50 mark for twelve consecutive sessions. Additionally, the Moving Average Convergence Divergence (MACD) histogram reveals sustained negative momentum below its signal line, collectively suggesting a bearish bias in the current market structure.
The technical weaknesses observed in the EUR/USD are further reinforced by fundamental economic divergences between the Eurozone and the United States. The European Central Bank (ECB) continues to adopt a cautious stance regarding monetary policy normalization, even as inflationary pressures ease more rapidly than anticipated. ECB President Christine Lagarde has emphasized a data-dependent approach, indicating that rate cuts may occur later than initially expected.
Conversely, the Federal Reserve has taken a more hawkish approach than many analysts had anticipated for early 2025. Strong labor market data and persistent services inflation have postponed expected rate cuts, creating a yield advantage for U.S. dollar-denominated assets. This advantage increases their appeal to international investors, resulting in capital flows favoring the dollar and exerting downward pressure on the euro.
Support Levels and Future Scenarios
With the EUR/USD trading below the key 1.1780-1.1770 confluence, analysts have identified several important support levels. Immediate support is situated at 1.1720, which represents the March low. Below this, the 1.1680 area provides substantial support, aligning with the 78.6% Fibonacci retracement level. The most critical support zone is between 1.1620 and 1.1580, containing the 2024 lows and serving as a major technical benchmark.
Market technicians outline two primary scenarios for the coming weeks. The first scenario anticipates a gradual decline towards the 1.1620-1.1580 support zone, interspersed with periods of consolidation. The second scenario suggests a more rapid decline if the pair breaks below 1.1720 with strong momentum. A third, less likely scenario involves a sudden reversal above 1.1780, which would necessitate a significant fundamental catalyst.
In conclusion, the EUR/USD outlook remains bearish as the pair continues to trade beneath the critical 1.1780-1.1770 confluence breakpoint. Technical indicators confirm persistent selling pressure, while fundamental factors such as central bank policy divergence and economic growth differentials underpin dollar strength. While certain support levels may temporarily halt the decline, the overall market structure suggests ongoing challenges for the euro in the near term.
