Technical signals, positioning and yield differentials indicate EUR/USD bulls may be targeting January's high.

The currency pair reached a 1-1/2-month high Friday, driven by evolving expectations regarding interest rates. Following the March U.S. CPI report, short-term interest rate markets indicate traders expect the Fed to hold rates steady for the remainder of 2026, while euro zone markets continue to price in potential rate hikes from the ECB during the same period. This shifting landscape, coupled with tightening U.S.-German 2-year yield spreads , diminishes the dollar's yield advantage over the euro, potentially underpinning a EUR/USD rally.

Additionally, the latest CFTC data reveals that net-euro positions are nearly flat, suggesting minimal selling pressure from investors looking to exit long-euro positions. This could lead to amplified bullish impacts in EUR/USD, resulting in larger-than-normal price movements.

Technically, the pair exhibits bullish momentum, with today's rebound from the 55- and 200-day moving averages and the formation of a daily bull hammer candle. The daily and monthly RSI readings indicate upward momentum remains, reinforcing the bullish outlook.

Resistance at 1.1800 poses a challenge, but if breached, January's monthly high of 1.2084 becomes a clear target for traders.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)