The EUR/USD currency pair experienced significant waves of volatility. It dropped below its 20 Simple Moving Average (SMA), a line that had been providing it support. At present, this SMA is proving to be resistance at about 1.1705. During the Asian trading session, the pair touched a high of 1.1771. That turned around pretty early in Europe as the prospect of a US dollar strengthening accelerated across the forex market. The EUR/USD pair fell over 100 pips from its intraday peak. Instead, it seems to be wandering toward even lower lows in the not too distant future.
Our recent movement in the EUR/USD pair represents a microcosm of the greater market seen today, driven by trade deals and preparation for pivotal economic releases. The US and the European Union (EU) recently agreed on a 15% tariff on most European goods entering the United States, adding pressure to the euro. Relatedly, the US dollar continues to strengthen. Consequently, technical indicators for the EUR/USD pair are in full bear trend extending to lower grounds, crossing above/below midlines.
The EUR/USD currency pair is now below its 20 and 100 SMAs. This latest drop only serves to underscore the international treaty’s difficulty to find its legs and build upward momentum. At the moment it is struggling with the 200 SMA, which might act as yet another major resistance level. The daily chart shows an increasing likelihood of continued drops. Decimal support levels are at 1.1640, 1.1600 and 1.1555. On the upside, resistance is seen at 1.1695, 1.1740 and 1.1785.
According to market analysts, the outlook for the EUR/USD currency pair remains uncertain. This doubt is due to changing trade relations and the most recent economic data releases. The US macroeconomic calendar picks up considerably from mid-week onwards. One event on everyone’s lips – what traders will be watching most closely – is the Federal Reserve’s interest rate decision.
US/EU trade negotiations are continuing on a number of other fronts. While all this played out, focus has turned to US-China relations, where negotiators from both countries are expected to continue dialogue today in Stockholm. Depending on their terms, these negotiations could be pivotal in influencing the future direction of global trade and currency valuation.
Recent surges in the EUR/USD pair underscore the powerful effect that exogenous events can have on currency pairs. This highlights the complex ways that global economies are connected. Traders prepare for a week loaded with key economic data. They’re particularly watching for any sign of a major shift in monetary policy from the Federal Reserve and preparing to respond to market movements with these changes.