EUR/USD Gains Momentum: Weak Dollar and ECB's Steady Stance Create a Perfect Match

**Dollar Retreats for the Second Consecutive Day, Euro Rises**

The US Dollar Index remains under pressure, declining for the second straight day and moving further away from the high set on December 10. Amid this correction, EUR/USD attracted a surge of buying during Asian trading hours, with prices finding support around 1.1710. After rebounding from a low of 1.1660 (near four-week lows), the exchange rate continued upward, currently trading around 1.1735, up 0.10% for the day.

**Central Bank Policy Divergence Sparks Upward Momentum**

The dovish signals from the Federal Reserve have been the main reason for the dollar's weakness, with market expectations of further rate cuts increasing. Meanwhile, the market generally believes the European Central Bank (ECB) will not continue aggressive rate cuts, and this policy expectation mismatch has provided strong support for the euro, becoming a key factor driving EUR/USD higher. The divergence in policy directions between the two central banks is becoming more apparent, tipping the scales in favor of the euro.

**Technical Indicators Signal Bullish Outlook**

From a technical perspective, the 1.1735 level is significant—it coincides with the 100-hour simple moving average and the 50% Fibonacci retracement of the decline from 1.1808 to 1.1660. Breaking through this critical level confirms the validity of the upward trend. Additional technical support comes from momentum indicators: MACD has turned positive and continues to rise, indicating strengthening buying momentum; RSI is at 59, suggesting room for further gains while avoiding overbought conditions.

**Market Outlook: Watch for 1.17 Mid-Range Resistance**

If EUR/USD can stay above 1.1735, the next resistance level is around the 1.17 mid-range, which aligns with the 61.8% Fibonacci retracement. Breaking through these resistance points would further solidify the bullish foundation, reflecting a stronger bullish sentiment. However, if the price fails to continue upward, it may face a new round of consolidation, oscillating within recent price ranges.