EUR/USD targets $1.20 for potential four-year high on Fed dovishness

EUR/USD is mounting a significant rally toward the crucial $1.20 level, which would mark a four-year high for the currency pair. The euro's strength stems from diverging monetary policy expectations, with markets anticipating a more dovish Federal Reserve stance while the European Central Bank maintains relative hawkishness. European economic data has shown surprising resilience, supporting the euro's appreciation against the dollar. The psychological $1.20 level represents a major resistance point not seen since 2021, with technical indicators suggesting strong bullish momentum. A successful break above this level could trigger accelerated gains toward $1.22-$1.25 range, attracting trend-following traders and potentially shifting long-term market dynamics. However, traders should monitor any shifts in Fed communication or unexpected European economic weakness that could derail the upward trajectory. Near-term support sits at $1.18, providing a cushion for any temporary pullbacks.