The Euro extended its recovery against the US Dollar on Monday, breaking above the critical 1.05 support level. This movement comes as the greenback faces broad-based sell-off, with the US Dollar Index (DXY) retreating around the 106.50 mark.

Despite the Greenback's current weakness, the robust economic outlook in the United States may underpin a resurgence in its uptrend after period of correction. The latest PMI data indicated that overall business activity expanded at the fastest rate in over two and a half years, driven by strong performance in the services sector despite a slight contraction in manufacturing output.

Investors are turning their attention to the upcoming PCE for October, scheduled for release on Wednesday. As the Fed’s preferred inflation gauge, the PCE figures will play a critical role in shaping expectations for monetary policy adjustments at the December meeting. Current market pricing suggests a 55.7% probability of a 25 basis point rate cut to a target range of 4.25%-4.50%, while the remainder anticipates rates to hold steady.

Eurozone soft data released last Friday underscored growing challenges facing the European Union's economy. The Flash HCOB Composite PMI for November unexpectedly declined, with both manufacturing and services sectors slipping into contraction territory. Notably, new orders decreased for the sixth consecutive month, signaling ongoing weakness in demand and potential pressures on the Euro.

Based on the daily technical chart, EUR/USD has decisively broken below its medium-term rising trend channel, putting buyers on the defensive. Last week's sharp decline below the key 1.04 level triggered a momentum-driven sell-off, but the subsequent technical rebound suggests buyers are attempting to recover lost ground. The immediate upside target lies at 1.06, a prior support level that is likely to act as a resistance. Any sustained move above this level could open the door for further gains, but this will hinge on whether buyers can establish and defend their positions above 1.06. For now, the broader trend favors sellers, and pullbacks remain corrective until proven otherwise:

The British Pound staged a robust recovery at the week's outset, outperforming major counterparts after suffering a sharp decline on Friday. The earlier sell-off was prompted by disappointing UK Retail Sales figures and a contraction in the flash Composite PMI for November, which fell below the 50.0 threshold for the first time since October 2023.

The Sterling's bounce appears linked to market expectations that the BoE may adopt a more gradual approach to easing monetary policy compared to other Western central banks. Traders anticipate that the BoE will maintain the current interest rate at 4.75% in December and are pricing in a cumulative 75 basis points of cuts to reach 4% by 2025.

The GBP/USD pair has broken below its medium-term trendline, signifying potential shift in the medium-term market sentiment. The breakdown signals that sellers have seized control, but the true nature of this move will depend on how quickly the price recovers above the trendline. A swift rebound and sustained move back above the line would suggest the recent drop was a false breakout, potentially reestablishing the trendline as support.

The initial recovery target lies at 1.2650, where the broken trendline aligns, now acting as resistance. If buyers fail to reclaim this level, it will confirm that the trendline has lost its supportive significance, leaving the initiative firmly in the hands of sellers. Further downside pressure could then accelerate if the recovery attempt falters, signaling a broader bearish trend: