In a remarkable display of bullish momentum, the EUR/USD has experienced a significant rally, reaching new heights over the past week. As the European Central Bank (ECB) announced a widely expected rate cut of 25 basis points, the single currency surged, marking its highest level in four months. This bullish acceleration continued for the fourth consecutive day, setting the EUR/USD on track for its most substantial weekly gain since March 2020. Meanwhile, Germany's proposed 500 billion euro fund to bolster military and economic growth adds further optimism to the Euro's outlook.
The ECB's decision, its sixth rate cut since June, played a pivotal role in the Euro's ascent. Following the announcement, the EUR/USD peaked at 1.0844, surpassing the critical 1.08 level. This surge underlined the strength of favorable fundamentals and bullish technical studies driving the currency pair. Analysts suggest that any potential dips are likely to be contained by the 200-day moving average (DMA) and broken Fibonacci 50% levels, providing support for continued upward movement.
Adding to the positive sentiment, Germany's initiative to inject 500 billion euros into military and economic growth promises substantial ripple effects across the European Union's largest economy. The increased financial commitment represents a significant shift in fiscal policy, potentially accelerating economic recovery and enhancing investor confidence in the Eurozone.
As the EUR/USD trends higher, targets are emerging at 1.0872, corresponding to the 200-week moving average (WMA), and further at 1.0969 to 1.1000, aligning with the Fibonacci 76.4% retracement of the range between 1.1214 and 1.0177, as well as a major psychological level. Despite these positive indicators, overstretched momentum and stochastic indicators suggest caution, indicating that bullish traction could face challenges.
The latest sharp rally has significantly improved the technical picture on the daily chart, boosting prospects for a sustained upward trajectory. Traders are closely watching these developments, weighing both technical and fundamental factors as they calibrate their strategies.