Prices have pulled back from recent peaks, with momentum sharply declining, now positioned firmly in bearish territory. This technical shift aligns with fundamentals that appear to favor the euro, making it potentially more susceptible to further declines unless key support levels hold strong.
Technical situation: breakdown signals bearish shift
Looking at the daily chart, EUR/USD has clearly lost its upward momentum, dropping below short-term support and critical moving averages.
- The price trades beneath both the 15-day and 20-day moving averages, which are both declining.
- A recent failure to hold near the 1.18 mark has created lower highs within a broader range.
- Selling pressure has intensified as the pair moves towards the 1.13-1.14 range.
This shift suggests a move from a consolidation phase toward a continued bearish trend, rather than just a temporary dip.
Major technical levels
Support
- 1.1350–1.1300: Immediate support area
- A daily close below 1.1300 could expose 1.1200, and then 1.1100.
Resistance
- 1.1500–1.1530: Initial resistance and former support
- 1.1700–1.1750: Significant resistance levels and previous range highs
- Only a sustained move above 1.1750 would negate the current bearish trend.
Momentum indicator
- RSI (14) is near 35, edging toward oversold territory.
- Momentum has fallen decisively below the 50 mark, affirming bearish dominance.
- There’s no apparent bullish divergence, suggesting more room for decline before any stabilization can be expected.
Fundamental factors: euro challenged by disconnect between policy and growth
European Central Bank: Dovish bias as a challenge
The euro continues to face difficulties as the market considers these points:
- The ECB’s recent rate cut
- Weak momentum
- Cooling inflation gives policymakers leeway to ease further
This positioning leaves the euro at a disadvantage regarding interest rate differentials.
Fed: relative support for the dollar
On the US side:
- Growth remains more robust compared to the eurozone
- The Fed emphasizes reliance on data and maintaining patience
- US yields, while volatile, continue to offer support in comparison to Europe
This environment bolsters the dollar’s strength, particularly during times of global uncertainty.
Wider macro context: Importance of risk sensitivity
EUR/USD remains vulnerable to:
- Shifts in global risk sentiment
- Volatility in stock markets
- Relative growth forecasts
Without strong risk-on signals, the euro tends to lag behind.
Future scenario
Continuation of bearish trend (baseline scenario)
- Trading below 1.1350 is expected to persist.
- A potential drop to 1.1200 could open the door to 1.1100.
- Strong economic indicators from the US and confirmation of ECB easing are likely to influence these movements.
Stabilization/correction bounce
- The oversold conditions might trigger a rebound towards 1.1500.
- However, these moves are likely to face selling pressure unless there’s a significant change in fundamentals.
Overall, EUR/USD has clearly turned bearish, aligning weakening momentum with a distinct divergence in policy and growth favoring the USD. Although oversold conditions might provide a short-term cushion, the broader trend seems to favor a continued sell-off rather than a sustained recovery.
Medium term bias: bearish
Short-term outlook: Potential for a weak oversold phase
Main risks: A sharp downturn in US economic indicators or an unexpected hawkish pivot from the ECB
