EURUSD recovery depends on Fed validating 2026 easing expectations

EURUSD has stabilized near 1.0520 after recent declines, with any sustainable recovery hinging on the Federal Reserve's confirmation of continued easing through 2026. The pair has found support at the 1.0500 psychological level, bouncing 0.15% from intraday lows as dollar bulls take profit ahead of the FOMC meeting. Current market pricing suggests three rate cuts in 2025, but uncertainty remains about the Fed's longer-term trajectory given persistent inflation concerns. The dollar index (DXY) consolidates near 106.50, with technical indicators suggesting overbought conditions. European economic data remains mixed, with German industrial production disappointing while French inflation holds steady. EURUSD faces immediate resistance at 1.0550, followed by the 50-day moving average at 1.0580. A hawkish Fed surprise could push the pair toward 1.0450, while validation of easing expectations might catalyze a recovery toward 1.0620.