just now
- Euro confirms bearish reversal after rejecting multi-week highs at 1.1830 and breaking below key Fair Value Gaps.
- Dollar rebounds strongly from 4H FVG, regaining bullish momentum as EUR/USD slides toward the 1.168 handle.
- Technical forecast: As long as 1.173–1.176 bearish FVG holds, EUR/USD may target 1.164 and 1.158 next. Otherwise, a break of 1.176 could strengthen EUR/USD.
Dollar Rebounds Higher
Dollar managed to create a sustained move to the upside after bouncing off from the 4-Hour Fair Value Gap resting between 97.150-97.316 as mentioned on yesterday’s analysis - US Dollar Forecast: Bullish Target Hit, Can the Dollar Push to 98 or Break Below 97? - showing signs of strength, as of the moment. With this strength, it paved the way for Euro to slide down near the 1.168 level.
Euro Stumbles Near 1.168 Level As Dollar Recovers
The Euro's multi-week rally has come to a halt near the 1.1830 resistance, with price now sliding back below key structure levels. While the broader narrative still includes a weak dollar and improved trade sentiment, the technical landscape shows early signs of distribution. The rejection from the Fair Value Gap and the failure to sustain bullish momentum suggest that the bearish scenario is beginning to play out.
This move was outlined on the last analysis - EUR/USD Forecast: Euro Extends Rally as Dollar Dips - Key Scenarios to Watch - and Euro broke down, invalidating the 4-Hour Fair Value Gap, showing signs of failed support. Parameters that were considered in anticipating a distribution include:
- Price fails to break and hold above the 1.18 level.
- Fair Value Gap level breaks 1.17327-1.17607.
With this, targets have been met:
- 1.173 FVG Bottom.
- 1.172 Previous Equilibrium Level.
- 1.168 Previous Bottom Range Level.
Market Drivers Recap: Fundamentals Still Mixed
Despite the recent bullish macro themes, short-term sentiment is beginning to shift:
1. USD Weakness May Be Priced In
Markets have been aggressively selling the dollar due to tariff fears and softening Fed tone. However, this catalyst may now be fully priced in, leaving EUR/USD vulnerable to profit-taking and repositioning.
2. ECB Still Cautious
While the ECB remains non-committal on further stimulus, policymakers have acknowledged low inflation and soft growth. This adds a ceiling to euro strength, especially when combined with technical exhaustion.
3. U.S. Event Risk Ahead
The upcoming FOMC Minutes (July 9) and U.S. inflation data will be crucial. Any hawkish undertone could fuel further USD strength and deepen the correction in EUR/USD.
Technical Outlook
Bullish Scenario
A breakout of the current range, invalidating the 2 bearish Fair Value Gaps could give Euro a boost to the upside with the premise that the U.S. dollar would start to lose steam for upside.
- Break above 1.176
- Bearish FVG (1.17361-1.17643) Invalidation
- Sustained move above breakpoint
Targets:
- 1.179-1.181 - Immediate Resistance Levels
- 1.183 - Multi-Week High
Bearish Scenario
Failure to create new highs and a sustained move to the upside and U.S. dollar continues to recover, we could Euro to slide further. We could see this materialize if:
- The Bearish FVG (1.17361-1.17643) Holds
- Euro consolidates below 1.172
- Break below 1.168
Targets:
- 1.164 - Previous Resistance Turned Support Level
- 1.158 - Low of the Next Range
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