Daily Price Outlook
During the European trading session, the EUR/USD currency pair has been under significant pressure, sliding to a fresh two-year low near 1.0200 as the week begins.
This sharp decline is largely attributed to the strengthening of the US Dollar (USD), which has been performing well amidst soaring bond yields.
The US Dollar Index (DXY), which tracks the Greenback’s performance against six major currencies, has surged to nearly 110.00, marking the highest level seen in over two years.
Moreover, the Euro (EUR) is facing strong selling pressure due to a combination of factors, including a generally bleak market sentiment.
Investors are growing increasingly risk-averse as fears mount over the potential economic fallout from protectionist policies under US President-elect Donald Trump.
There are rising concerns that these policies could lead to a global trade war, which would undermine the stability of international markets and diminish the appeal of risk-sensitive assets like the Euro.
This growing uncertainty has left the EUR/USD pair vulnerable, with investors turning to the US Dollar as a safe-haven amidst the prevailing global economic jitters.
EUR/USD Faces Pressure Amid Global Trade Concerns and ECB's Dovish Stance
On the EUR front, the Euro (EUR) is facing significant selling pressure due to weak market sentiment. Investors are becoming more cautious as fears grow that US President-elect Donald Trump’s protectionist policies could lead to a global trade war.
During his campaign, Trump threatened that the European Union (EU) would face heavy penalties for not buying enough American exports, raising concerns about economic tensions between the US and Europe.
At home, the Euro is also under pressure from expectations that the European Central Bank (ECB) will continue to ease its monetary policy.
ECB Chief Economist Philip Lane recently suggested that more interest rate cuts are likely as the central bank seeks to prevent the economy from slowing down too much.
He mentioned that the ECB’s approach should be balanced, avoiding being too aggressive or too cautious in its decisions this year.
In addition to this, ECB policymaker Boris Vujčić commented that he is comfortable with market expectations for more interest rate cuts, but he pushed back against ideas of speeding up the current pace of easing.
Vujčić emphasized the need for gradual cuts in interest rates, given the uncertainty surrounding the global economy. This ongoing policy stance has kept the Euro weak, as investors remain wary of the ECB's actions.
Therefore, the combination of global trade war concerns, ECB's policy easing expectations, and cautious sentiment towards the Euro has led to continued weakness in EUR/USD, causing the currency pair to experience selling pressure and a downward trend.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.02137, down 0.26% on the day, reflecting bearish momentum as the dollar strengthens. On the 4-hour chart, the pivot point at $1.02487 serves as a crucial threshold for the pair’s short-term direction.
A sustained break below this level could push prices toward immediate support at $1.01664, with further downside targets at $1.01118 and $1.00691.
Resistance levels remain intact at $1.03198, $1.03632, and $1.04534. Notably, the 50-day EMA at $1.03232 highlights a bearish bias, with prices trading consistently below this average.
The RSI confirms downward momentum, although it is nearing oversold territory, which could signal a potential short-term consolidation.
The recommended strategy is to enter short positions below $1.02478, targeting $1.01656 while managing risk with a stop-loss at $1.02947.
A decisive break below $1.01664 could trigger an accelerated bearish move, while a rebound above the pivot point might shift sentiment toward the resistance zones.
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