The EUR/USD currency pair has skyrocketed to multi – year extremes! It touched 1.1473 on Friday, the strongest level since February 2022. This 85 percent increase is driven in part by continued global market volatility heavily affected by trade tensions and economic uncertainty. The two have receded from their high water mark. It is currently trading, as of writing, well below the 1.1300 level, leaving us all to wonder what happens next.
According to market analysts, the EUR/USD currency pair may continue to move upward. This would occur should it succeed in breaking above the 1.1470 resistance level. If that happens, the 1.1540 to 1.1560 area would likely be the next focus. While extreme overbought conditions are certainly present, there are more signs of an impending decline. This of course means that the conditions for a bullish sentiment will be abundant.
Recent Performance and Trends
Both the short and long-term performance of the EUR/USD pair has shown a steady and positive upward trend, confirmed by a number of key technical indicators. The 20-day Simple Moving Average (SMA) is climbing steeply. At the same time, the rapidly rising, longer-term SMAs are lagging, indicating powerful short-term bullish momentum. The Momentum indicator is making its way inside extreme overbought readings, adding more credence to the idea of continued upward movement.
Even with the seeming strength in EUR/USD pairing, participants in the markets are hesitant. The Relative Strength Index (RSI) has been bouncing near 76. This indicates that momentum is still strong, but the pair is close to overbought levels. Given these factors, we expect significant volatility potential over the short term. Speculators will calculate whether to cash out or stay invested.
OK, so overwhelming fundamentals aside… Furthermore, the duo’s recent retreat from its all-time high indicates that some traders are starting to take profits. The 1.1300 area is likely to be an important and key trading level now. Analysts argue that the EUR/USD pair would attract more buyers if it continues to remain above this level. These buyers are rushing to stake a claim on future largesse before it blooms.
Potential Resistance and Support Levels
So how the EUR/USD pair has been muttering its way through this new trading environment. Analysts have identified significant resistance and support levels that traders must be continuously aware of. Acceptance above that 1.1470 figure would therefore be seen as a bullish breakout, confirming further upside in the run towards that 1.1540/60 resistance zone. On the other hand, if the pair breaks down below this resistance, it could face strong bearish pressure.
Other potential support areas come in at 1.1240 and 1.1160. The 1.1240 area is the line in the sand for bulls and bears. Its level equal to 2025 highs should provide a magnetic attraction for buyers if and when tested. Conversely, if the EUR/USD pair falls under this support level, the sentiment in the market can change. Without urgent intervention, this would result in even greater declines.
Traders should stay cautious while they work their way around these levels of supports and resistances. Still, the requisite for a corrective decline is there if the bullish momentum loses its luster or broader factors are affected adversely to market dynamics.
Implications of Global Events on Currency Pair Movements
The recent surge in the EUR/USD pair comes amid heightened global trade tensions, particularly between the United States and China. Former President Donald Trump recently announced a dramatic increase in tariffs on Chinese goods, stating, “Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately.”
This announcement has further complicated the extremely fragile trade landscape. Investors are already prone to overreacting to signs of potential negative economic impact, creating panic and unnecessary currency fluctuations. The European Union has indicated its readiness to respond to such developments, with European Commission President Ursula von der Leyen remarking, “If negotiations are not satisfactory, our countermeasures will kick in.”
These comments are indicative of the increasing intricacies involving trade relationships and their possible repercussions on currency markets across the globe.