EURUSD is gaining traction for the second day in a row, despite a little decline in the USD.

EURUSD pair staged a goodish 75-pip comeback from the mid-1.0600s, or over a one-month low set on Monday, and was backed by a number of reasons. The euro gained a modest boost as the European Commission raised its Eurozone growth prediction for 2023 to 0.9% from 0.3% previously.

Hawkish Fed predictions should assist restrict the USD’s decline and limit the pair’s gains.

Rising speculations on the European Central Bank (ECB) raising interest rates further and the emergence of some US Dollar selling worked as a tailwind for the major. A minor drop in US Treasury bond rates, along with a favorable shift in risk sentiment, put some downward pressure on the safe-haven Greenback. However, predictions that the Federal Reserve would maintain its aggressive approach should help minimize volatility. The greenback and US bond rates are on the down. The Labor Department’s yearly revisions of CPI data, which showed that monthly consumer prices climbed in December rather than decreasing as originally predicted, confirmed the Fed’s expectations for additional tightening.

Furthermore, one-year inflation forecasts in the University of Michigan poll rose to 4.2% this month from 3.9% in January. As a result, the market’s attention will be drawn to the release of the critical US CPI data, which is scheduled for later in the early North American session on Tuesday.

The data will be crucial in determining the Fed’s rate-hike path, which will boost USD demand. Meanwhile, some repositioning trade puts USD bulls on the defensive and drives the EURUSD For the second day in a row, the pair has risen.

Traders are now looking ahead to the preliminary Eurozone Q4 GDP data before the critical US CPI release.

Traders will take cues from preliminary fourth-quarter (Q4) Eurozone GDP figures on Tuesday as they approach the big data risk (GDP). The second estimate is unlikely to give much momentum, but any disappointment would fuel recession concerns and weigh on the shared currency. The USD price dynamics should generate short-term trading opportunities near the EURUSD pair.

EURUSD Technical Outlook

Technically, the inability to gain acceptance below the 1.0700 confluence support breakpoint and the ensuing rally should cause bearish traders to be cautious.

The handle is made up of the 50-day simple moving average and the bottom end of a roughly three-month-old rising channel.

Any additional loss now finds some support at the overnight swing low, around 1.0655, which should now serve as a pivot point. Some further selling will confirm a new collapse and pave the path for larger losses.

The EURUSD pair may potentially become vulnerable, falling below the 1.0600 round figure and accelerating its decline towards the 1.0575-1.0570 support zone. Spot prices might finally fall below the 1.0500 psychological level on their way to the YTD low, which is expected to be around the 1.0480 level.

Last week’s swing high, just ahead of the 1.0800 level, on the other hand, is expected to operate as an immediate strong barrier. This is followed by the 1.0850-1.0860 resistance zone, which, if strongly passed, will eliminate any short-term bearish bias.

The momentum might push the EURUSD pair towards the 1.0900 level on its way to the 1.0930 zone, allowing bulls to strive for the psychological level of 1.1100.