EUR/USD edges higher ahead of critical Eurozone CPI data, supported by a weaker dollar and signs of stabilizing momentum. Daily technicals show positive signals, with coiling moving averages and contracting Bollinger bands suggesting reduced volatility. Resistance at 1.0610 and the 21-DMA at 1.0624 remains a significant hurdle for bulls, and a break above could indicate a shift in sentiment, positioning the pair for further gains next week.

Technicals favor consolidation. While downside risks persist, key supports at 1.0425 and 1.0331 provide a firm base, reducing the probability of sharp declines in the near term. Bulls need a close above the 21-DMA to solidify control, but failure to clear resistance could leave EUR/USD vulnerable to renewed selling pressure, especially if Eurozone data underwhelms.

FX options point to reduced downside volatility for EUR/USD. The sharp decline in USD call premiums over EUR suggests a cooling in bearish sentiment. Near-term risk reversals highlight diminishing expectations of a rapid decline, though traders remain wary of potential downside. This shift in market perception could mean a more measured descent for EUR/USD if bearish pressures resume, with realized and implied volatility likely subdued unless key data reignites momentum.