Consolidation After volatility: European Currencies Search For Direction

European currencies are showing restrained movement, remaining in a range-bound phase following last week’s heightened volatility. Meetings of the Federal Reserve and the Bank of England, along with comments from policymakers, triggered sharp swings: EUR/USD and GBP/USD initially declined, followed by a rapid rise that pushed them beyond previous ranges. However, this move proved to be a false breakout, and the return of prices into prior corridors points to the formation of market equilibrium after the failed attempt to break higher.

The current fundamental backdrop remains neutral following a reassessment of expectations regarding future Federal Reserve policy. Geopolitical factors have temporarily faded from focus, while market participants have adopted a wait-and-see approach, assessing prospects in the absence of clear catalysts.

EUR/USD

EUR/USD continues to trade within the 1.1660–1.1750 range, holding between key support and resistance levels. The return into the previously broken corridor reinforces the importance of these boundaries, where a zone of balance and liquidity accumulation is forming. The base scenario remains continued sideways movement until a new fundamental driver emerges.

A sustained break above 1.1750 could open the way for a test of the important 1.1800 level. Conversely, a move below 1.1660 in the coming sessions may lead to a deeper downward correction.

Key events for EUR/USD:

• today at 10:15 (GMT+3): Spain services PMI
• today at 10:30 (GMT+3): speech by Bundesbank Vice President Buch
• today at 10:55 (GMT+3): Germany services PMI

GBP/USD

GBP/USD is forming a similar range structure, remaining within the 1.3500–1.3600 corridor after an unsuccessful attempt to break higher. The current price action reflects a balance between buyers and sellers amid the absence of a clear fundamental direction.

If buyers manage to secure a position above the upper boundary, the pair could revisit the recent high near 1.3660. A break below support at 1.3500 may trigger a decline towards 1.3460.

Key events for GBP/USD:

• today at 11:30 (GMT+3): UK services PMI
• today at 15:15 (GMT+3): US ADP non-farm employment change
• today at 20:00 (GMT+3): speech by Chicago Fed President Austan Goolsbee

Overall, the market is in a consolidation phase following a false breakout, forming a period of accumulation ahead of the next impulsive move. Upcoming macroeconomic data could act as a catalyst for a breakout from the range: depending on the outcome, this may lead either to renewed upward momentum or to a resumption of pressure on European currencies.

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