Positive Euro Area reports and overall U.S. dollar weakness helped prop EUR/USD higher from its weekly lows.

The pair is now testing a key resistance zone, which ups the odds of EUR/USD extending a longer-term trend.

We’re taking a closer look at the pair’s 4-hour time frame!

EUR/USD 4-hour Forex Chart by TradingView

In case you missed it, service PMI reports from the Euro Area generally improved from November to December, with readings from Germany, France, and the Euro Area also surpassing their initial estimates.

On the flip side, the U.S. dollar struggled despite Treasury yields hitting fresh multi-month highs, as traders grappled with start-of-year risk-taking and uncertainty around President-elect Trump’s tariff plans.

Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the euro and the U.S. dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!

EUR/USD kicked off the year about 20 pips shy of 1.0200 but quickly rallied to the 1.0430 area, brushing against the R1 (1.0437) Pivot Point.

Interestingly, the area also lines up with the 4-hour chart’s 100 SMA and a trend line resistance that’s been solid since late September 2024.

Will the consolidation at the resistance zone draw in enough sellers and extend EUR/USD’s longer-term downtrend?

Look out for bearish candlesticks closing below 1.0400, which could encourage EUR sellers to drag EUR/USD back down to its 2025 lows or even new monthly lows in the next few days.

But if the pair prints bullish candlesticks and breaks above the 1.0450 psychological level, it could draw in buyers and spark a bullish reversal.

What do you think? Which way will EUR/USD go in the next trading sessions?

Whichever bias you end up trading, don’t forget to practice proper risk management and stay aware of top-tier catalysts that could influence overall market sentiment!