EUR/USD rallied on Monday, advancing 0.51% to a three-session high of 1.0595 as falling U.S. yields tightened German-U.S. spreads, and risk-on sentiment drove the U.S. dollar lower. The pair’s recovery above its 5-day moving average and rising RSI are early signs of bullish potential, but structural challenges related to euro area growth and ECB policy could limit further gains. The session’s positive momentum was underpinned by a decline in USD/CNH and a rally in gold and equities, reflecting broader dollar weakness.

Upcoming euro area November PMIs are expected to influence sentiment significantly, with markets closely watching Germany and France for signs of economic resilience or deterioration. ECB policymakers, including de Guindos and Nagel, highlighted risks to growth from potential U.S. tariffs, suggesting the central bank may lean towards deeper rate cuts if economic conditions worsen. Short-term rates markets are already pricing in a 25bps ECB cut by year-end, but weaker-than-expected PMIs could prompt a reevaluation of the terminal rate, pressuring EUR/USD lower.

From a technical perspective, EUR/USD’s immediate resistance lies at 1.0600, followed by stronger hurdles near the 21-day moving average at 1.0635. On the downside, options market positioning suggests traders are bracing for a potential drop below 1.0450, with risk reversals heavily favoring euro puts. A break below key support could accelerate selling towards parity, especially if euro area data continues to falter, while the Fed maintains a comparatively hawkish stance.