EUR/USD Holds 1.17 Support as Dollar Slips, Eyes Breakout Above 1.1770
The EUR/USD pair is trading around 1.1735 on Tuesday, little changed after rebounding from last week’s lows of 1.1660.
Quick overview
- The EUR/USD pair is trading around 1.1735, recovering from last week's low of 1.1660 due to dollar weakness amid concerns of a potential US government shutdown.
- Former President Donald Trump's announcement of new tariffs is further impacting the dollar and limiting the upside for EUR/USD.
- Eurozone economic data is disappointing, with German Retail Sales and import prices declining, contributing to a fragile euro despite dollar weakness.
- Technically, EUR/USD is testing a key descending trendline, with a break above 1.1760-1.1770 potentially leading to higher levels.
The EUR/USD pair is trading around 1.1735 on Tuesday, little changed after rebounding from last week’s lows of 1.1660. Dollar weakness is driving the move as traders prepare for a possible US government shutdown later this week. VP JD Vance said funding disputes in Congress make a shutdown “highly likely” and that data releases will be delayed, including Friday’s NFP.
Adding to the dollar’s woes, former President Donald Trump announced new tariffs effective October 14. These include a 10% tax on softwood and a 25% duty on furniture and cabinetry, with more on trucks and pharmaceuticals to come. While this is about trade tensions, it’s also killing risk appetite and capping EUR/USD’s upside.
Eurozone Data Fails to Support Euro
Eurozone data didn’t help the euro. German Retail Sales fell 0.2% in August, following July’s 0.5% decline. Import prices also disappointed, down 0.5% month-on-month – more than twice the expected drop – and the annual decline deepened to -1.5%.
Confidence indicators were mixed: Consumer Confidence rose slightly to -14.9 in September but Industrial and Services Sentiment fell. Now we wait for Germany’s September preliminary CPI which is expected to show modest growth. Without stronger macro data the euro’s strength is fragile despite dollar weakness.
EUR/USD Technical Outlook: Key Break Ahead
Technically, EUR/USD is testing a descending trendline that has capped rallies since mid-September. A break above 1.1760-1.1770 confirmed by a bullish engulfing candle could open the way to 1.1820 and 1.1873.
Key levels:
- Support: 1.1718 and 1.1683, with deeper levels at 1.1646.
- Resistance: 1.1760-1.1770, then 1.1820 and 1.1873.
- Indicators: RSI at 61 signals momentum is improving; 50-SMA (1.1716) and 100-SMA (1.1736) are now support.
Longs only above 1.1770, stop 1.1715. Below the trendline a shooting star or bearish engulfing candle would be short towards 1.1683.
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