It is flirting with the resistance of the descending channel, just below the 1.1100 mark

• EUR/USD is building on this week’s rebound from a multi-week low amid a bearish USD.
• Bets on more rate cuts by the Fed and a positive risk tone are weighing on the greenback.
• Bulls must wait for a break through a descending channel before placing new bets.

EUR/USD is building on the previous day’s good recovery move from the psychological level of 1.1000, or a near four-week low, and is attracting some buyers for the second day in a row on Friday. Momentum is lifting spot prices to the upper end of the weekly range around the 1.1090 area during the Asian session and is sponsored by general weakness in the US dollar (USD).

A weaker-than-expected US Producer Price Index (PPI) report on Thursday raised bets for more interest rate cuts by the Federal Reserve (Fed) next week. This, along with a positive risk tone, is pulling the USD to a one-week low and is proving to be a key factor acting as a tailwind for the EUR/USD pair. Meanwhile, the European Central Bank (ECB) refrained from offering specific interest rate guidance, which supports the common currency and contributes to the supply tone around the currency pair.

Technically, spot prices are currently trading near the top of a more than three-week downtrend channel. Sustained strength beyond will suggest that the recent corrective pullback from the July 2023 high reached last month has run its course and is paving the way for another near-term appreciation move. EUR/USD could then accelerate the positive move towards the next relevant hurdle near the 1.1155 area before making another attempt to conquer the 1.1200 round-digit mark.

On the other hand, the 1.1065-1.1060 horizontal zone now appears to protect the immediate downside ahead of the 1.1000 pivot support. The latter is closely followed by the bearish support of the trend channel, currently near the 1.0975 area, which, if decisively broken, will be seen as a new trigger for bearish traders and prompt aggressive technical selling. Further decline has the potential to pull EUR/USD towards testing the levels below 1.0900 with some intermediate support near the 1.0950 region.

EUR/USD 4-hour chart