EUR/USD Analysis: A Dip Amid Rising Geopolitical Tensions and Fed Speculations
The EUR/USD duo commences the week with a subdued bearish undertone, breaking its recent three-day climb, settling near the 1.0600 mark — a zenith reached the previous week. Throughout the Asian trading session, the spot prices exhibited a downtrend, meandering around the daily nadir of 1.0550.
The financial landscape seems influenced by the aftermath of Friday’s ambiguous U.S. employment statistics. Amplified geopolitical uncertainties have boosted the appeal of the U.S. Dollar, traditionally seen as a safe harbour, thereby pressuring the EUR/USD equation. This appeal is further augmented by expectations of rigorous policy amendments from the Federal Reserve, buttressing the elevated stance of U.S. Treasury yields.
Concurrently, speculations around the European Central Bank’s (ECB) hesitation towards imminent rate hikes seem to hinder the pair’s upward momentum.
Analyzing from a technical viewpoint, the trajectory since hitting a 17-month pinnacle in June aligns with a descending pattern, hinting at a consistent bearish trend. Compellingly, the occurrence of a ‘death cross’ — illustrated by the 50-day Simple Moving Average (SMA) descending beneath the 200-day SMA for the inaugural time since July 2021 — tilts the scale towards bearish investors.
Supplementing this is the fact that, while daily chart oscillators have recuperated somewhat, their persistence in the bearish zone suggests that EUR/USD’s path of least resistance remains downward.
Nevertheless, the significant 1.0500 threshold might serve as a cushion, potentially mitigating further erosions. A decisive breach beneath this barrier could reinforce the bearish sentiment, rendering the EUR/USD susceptible to revisiting its annual nadir around the 1.0450-1.0445 zone witnessed recently.
This bearish momentum might even challenge the support of the rising trendline situated near the 1.0400 demarcation. Sustained selling could be perceived as a green light for bearish participants.
Conversely, should the momentum surpass the 1.0600 level, its advancement could find resistance, possibly plateauing near the upper rim of the cited channel, approximately the 1.0640-1.0645 sector. A convincing surpassing of this zone might insinuate a short-term bottoming of the EUR/USD , potentially pivoting the sentiment towards the bulls.
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