The euro has recently seen a pullback against the U.S. dollar, but found solid support around the 1.1686 level, sparking a renewed wave of buying interest. Interestingly, a classic bullish flag pattern is beginning to take shape on the technical charts—an encouraging sign for traders watching for a potential upside breakout.

From a technical standpoint, the 1.1686 level doesn’t just line up with the 38% Fibonacci retracement—it also forms the lower boundary of the emerging bull flag pattern. Typically, such patterns represent a consolidation phase within a broader uptrend. If the euro can continue to hold this level, it signals that bulls are still in control and could lead to a push higher. A break above the 1.1805 resistance could open the door for a move toward the next target around 1.1965.

Support from technical indicators strengthens the bullish case. Major moving averages remain aligned in favor of continued upward momentum. Although the RSI briefly touched overbought territory, the euro quickly rebounded after testing support, suggesting underlying strength. Over the past five trading days, EUR/USD has averaged a 68-pip daily range—moderate volatility without signs of excess.

However, not everything is dictated by chart patterns. News that the U.S. may soon impose steep tariffs on EU goods is introducing short-term uncertainty. Negotiations are underway, with the EU aiming to reach a deal before the proposed tariffs go into effect on August 1. The outcome of these talks could significantly sway euro sentiment.

On the fundamental side, the European Central Bank remains committed to an accommodative monetary stance. Coupled with increased capital inflows into Eurozone bonds, this has helped support the euro. Meanwhile, traders are closely watching U.S. economic data. If the dollar doesn’t find backing from improving fundamentals, further euro strength could be on the table.

In summary, as long as EUR/USD stays above the key support zone between 1.1686 and 1.1730, the technical outlook will likely remain positive, with potential to challenge higher resistance levels. However, a drop below this range could undermine the current bullish setup and invite further correction.

Investors should monitor developments around U.S.-EU trade talks and upcoming U.S. economic releases—both will be crucial in shaping the near-term direction of the euro. While uncertainties remain, the bull flag structure is intact, giving euro bulls the upper hand for now.