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EUR/USD: Double bottom takes shape as inflation pressures ECB
The euro rises around 0.5% to $1.1246 by midday on Wednesday, 4 November. Following several months of selling pressure, a potential double bottom is taking shape in EUR/USD.
Meanwhile, higher inflation is putting renewed pressure on the European Central Bank. Technically, 1.1280 is the key level that could determine whether the recovery gains momentum.
Eurozone inflation puts a December ECB hike in play
Eurozone inflation rose to 4.0% in October, up from 3.8% in September and twice the ECB’s 2% target. Energy prices remain the main driver, while core inflation, which excludes food and energy, held steady at 2.5%.
These figures strengthen the case for another ECB rate hike in December. The central bank left interest rates unchanged on 29 October, highlighting the risks that higher energy prices pose to both inflation and economic growth. Its next decision will depend on incoming data. Higher interest rate expectations can support the euro, although the outlook for US rates also matters.
EUR/USD: A close above 1.1280 would confirm the double bottom
The October lows at 1.1117 and 1.1106 form the base of the potential W-shaped reversal pattern. Its neckline sits within the 1.1260–1.1280 resistance zone. A daily close above the upper boundary would confirm the breakout.
Quick explanation: A double bottom develops when prices rebound twice from a similar support level. The bullish signal comes with a breakout above the intervening recovery high, with 1.1280 serving as the more conservative confirmation level in this analysis.
A confirmed breakout would imply a measured target of approximately 1.1455, with intermediate resistance at 1.1336 and 1.1407. Further hurdles lie at 1.1478 and within the 1.1547–1.1568 resistance zone, which includes the declining 200-day moving average.
The RSI points to easing selling pressure but, at around 44, remains below the 48.5 signal threshold used in this analysis. Momentum therefore needs to strengthen further to support a broader trend reversal.
EUR/USD daily chart: Double bottom approaches the 1.1280 breakout level
EUR/USD: Potential long and short setups
| Scenario | Confirmation | Potential targets | Technical stop reference |
|---|---|---|---|
| Long: Confirmed breakout | Daily close above 1.1280, followed by a successful retest of the breakout zone | 1.1336 → 1.1407 → 1.1455 | Below the low of the successful retest |
| Short: Breakdown below the base | Daily close below 1.1106, followed by a failed retest from below | 1.1009 → 1.0807–1.0795 | Above the high of the failed retest |
Conclusion
A daily close above 1.1280 could open the way for EUR/USD to extend its recovery towards 1.1455. Until that breakout materialises, the downtrend from January’s high remains the dominant structure. A fall below 1.1106 would invalidate the potential double bottom.
EUR/USD: Five Year Price Performance
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