On Tuesday EUR/USD traded with a soft tone, and the cross remained just above the vicinity of a multi-week low at 1.1542. The duo has recently experienced chronic weakness, succumbing to a bigger, dour moment that has descended upon the financial markets. The current US government shutdown has continued to weigh on investor sentiment. With growing trade tensions between the United States and China, investors are heading to safe-haven assets.
Indeed, the current trading environment has forced EUR/USD into a distinctly defined range. This consolidation range is characterized by a sequence of lower lows and lower highs. That doesn’t mean market participants aren’t continuing to play it safe. Consequently, the pair still trades beneath the 20 and 100 Simple Moving Averages (SMAs). The 50-period SMA on the 4-hour chart is short but losing ground, adding strength to the current bearish trend. It is still hovering above the 200 SMA.
Support levels visible for EUR/USD are robust at 1.1540, 1.1500, and 1.1460. Conversely, resistance has been established at 1.1590, 1.1630 and 1.1670. As the market anticipates Federal Reserve Chair Jerome Powell’s upcoming discussion about the economic outlook and monetary policy in the American afternoon, traders are keenly monitoring any potential impact on currency movements.
Further resistance, according to the 4-hour chart, comes from a bearish 20 SMA limiting any advances in EUR/USD. We, however, see hefty resistance at the 1.1590 level. Further confirming the bearish inclination is a bearish 100 SMA crossing under a flat 200 SMA. This technical configuration is another signal that downward pressure on EUR/USD is here to stay. Only major shifts in market expectations or macroeconomic data would change this trajectory.
In the context of the ongoing US government shutdown, market participants are particularly sensitive to developments that could influence fiscal policy and economic stability. The ongoing peril of imminent government collapse has added to a broader risk-off sentiment in international markets. Investors are still on the lookout for how these factors could play into Powell’s comments later in the day.
Adding to this climate of caution are new trade tensions between the US and China. The bilateral relationship between the two economic heavyweights continues to be tense. As a result, many investors are flocking to safer assets out of concern for possible economic fallout.