EUR/USD at Key level: Expansion or Reversal Setup?
EUR/USD is currently trading within a critical technical area following a strong impulsive move to the upside. The daily structure remains constructive in the short term, but price has now reached a higher-timeframe supply zone that historically tends to attract sellers, making this level extremely relevant for the next directional decision.
From a price action perspective, the market recently broke above prior resistance with momentum, signaling underlying bullish pressure. However, the current retracement suggests the possibility of a classic continuation structure rather than an immediate reversal. As long as price holds above the ascending trendline and continues to print higher lows, the broader scenario favors another expansion leg toward the 1.2050–1.2100 area.
A deeper pullback into the underlying demand imbalance would still be technically healthy, allowing the market to rebalance before any potential continuation of the bullish move.
Looking at the COT report, non-commercial traders continue to increase long exposure while reducing short positions — a positioning shift that typically reflects growing institutional confidence in euro strength. At the same time, commercial participants remain structurally short, behavior consistent with their hedging needs during rising markets rather than a true directional signal. Overall, the latest flows maintain a moderately bullish bias.
The U.S. Dollar Index COT reinforces this view: large speculators remain net short on the dollar, suggesting that any USD rallies may remain corrective unless positioning changes materially.
Seasonality, however, introduces an important nuance. Historically, February tends to show mild euro weakness, particularly when observing the 5-year and 10-year averages. This does not necessari