EUR/USD is entering the new week with bullish momentum after the recent decline in expectations for a Federal Reserve rate hike. A softer US inflation outlook has reduced some of the support for the Dollar, allowing the Euro to strengthen toward important technical resistance levels.

The pair is currently testing the area around 1.16, a level that could become an important technical barrier. A sustained break above this zone could strengthen the bullish outlook, while failure to break higher could trigger profit-taking and a short-term correction.

Market participants remain focused on the relative outlook between the Fed and European Central Bank. If US rates remain unchanged while expectations for easier policy in Europe remain limited, the interest-rate differential could become less supportive of the Dollar.

Traders should therefore watch price action around major resistance and support levels closely. With monetary-policy expectations continuing to shift, EUR/USD could remain highly sensitive to upcoming US data and central-bank commentary.