EUR/USD Outlook: Euro Rebounds Toward Key Imbalance Resistance

The EUR/USD pair experienced a bullish reversal after sweeping liquidity below the recent key low of 1.1114. This technical movement opens the door for a corrective recovery toward the overhead resistance zone marked by Imbalance 24. While bearish momentum has dominated in recent weeks, the recent price action suggests potential for a short-term upward retracement.

Fundamental Drivers: EU Inflation and Political Landscape

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Recent fundamental developments have provided support for the European currency. Eurozone inflation accelerated to 4.0%, reinforcing expectations for further monetary policy tightening by the European Central Bank (ECB) at its December meeting. Meanwhile, US election results pointing to a divided Congress have heightened political uncertainty, potentially delaying major economic legislation and tempering US dollar demand.

Fed and ECB Policy Dynamics

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Despite recent US dollar strength driven by expectations of Federal Reserve hawkishness, the Fed's underlying stance remains more balanced. At the latest FOMC meeting, only two members voted in favor of policy tightening as the central bank adopted a neutral stance. Furthermore, while US third-quarter GDP beat forecasts, Eurozone economic growth also outperformed expectations, creating largely parallel fundamental backdrops for both central banks.

Technical Analysis and Key Price Levels

From a technical perspective, the overarching bearish trend remains structurally intact unless buyers can invalidate the Imbalance 24 zone. Key downside reference points include the liquidity sweep level at 1.1114 and the major support low at 1.1066 from June of last year. A decisive move above Imbalance 24 is necessary to establish a broader bullish trend, whereas a rejection from this zone could trigger renewed selling interest.

Upcoming Economic Events

Market participants are focused on key economic calendar events, including US Initial Jobless Claims at 13:30 UTC and a scheduled speech by ECB President Christine Lagarde at 15:00 UTC. While these events may yield limited market impact, short-term price action around key technical zones will be critical in determining whether the euro can sustain its current recovery.

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