The EUR/USD has gained for a third straight day, lifted by a generally weaker US Dollar. The area encircled in green shows the consistent decline during the Asian trading session. Here, the pair had support around the 1.0800 level, rapidly attracting a cluster of keen dip-buyers ready to cash in on discounted prices. The EUR/USD plunged to a multi-week low last Thursday. Now, the pair is working overtime to ensure that it breaks out further and establishes this recent high as a new base.
First, the US Dollar has sold off aggressively, providing a very strong tailwind to the EUR/USD pair. This decline, particularly given the lack of upward support here, is critical to its upward journey. The two’s rise to power has not come without complications. Further compounding the problem, the market is in a very strong risk-off mood. This has capped any upside potential for the EUR/USD, creating resistance that traders are currently keeping a close eye on.
Indeed, in recent days the EUR/USD currency pair has proven to be remarkably resilient. It’s recovered from those lows and that’s a strong signal that sentiment among investors is changing. The No. 1 thing keeping this recovery booming is the dollar’s overall weakness. At the same time it has been challenged by a multitude of economic and geopolitical challenges. Consequently, market players have been attracted towards the Euro, looking for opportunities in the Euro currency pair.
With all of this positive momentum, the persistent risk-off environment is keeping a lid on the EUR/USD. Global uncertainties, from economic deceleration to war in Ukraine and beyond, have spurred caution across investors’ portfolios. This sentiment has capped the upside for the EUR/USD, as traders are understandably cautious of possible turmoil across financial markets.
The driver interplay between the weakening USD and the risk-off mood presents a mixed bag for the EUR/USD. America’s reduced economic clout soon raises the value of the Euro. That establishes a strong, supportive backdrop that invites more progress. Conversely, the risk-off sentiment provides the needed check and balance, cooling ardor and limiting gains.
The EUR/USD will look to extend its recovery from last week’s lows. For their part, market analysts are eagerly watching all sorts of economic indicators and possible breakthroughs that could shift sentiment. Especially inflation data, central bank monetary policies, and geopolitical events. Collectively, they will have a massive impact on determining the future direction of the currency pair.