My favorite currency pair, EUR/USD, has been very volatile lately. It had touched a new January low of 1.1593 but subsequently was able to close the week just above that 1.1600 floor, specifically at 1.1631. Market participants have picked up on a negative bias for the common currency. Judging by many technical indicators, BTC’s momentum against the US dollar is quickly losing steam. Now as market participants continue to be aghast from this reality, they are forced to wonder what this means for their future trading strategy.
Throughout the week, EUR/USD had a difficult time following through to the upside. It conversed just short of ten pips higher than the all-important symmetrical figure of 1.1600 that potentially implies difficulties in the upcoming sessions. Recent, continued march lower in EUR price action has raised alarm bells for the ‘strong euro’ dialogue. Currently, it’s up against dynamic resistance levels from numerous Simple Moving Averages (SMAs).
The 20-day Simple Moving Average (SMA) has turned down, confirming the short-term bearish mood. Nonetheless, it remains comfortably above the higher 100-day SMA. This juxtaposition serves to underscore the challenge faced by fleeting fad. Longer-term indicators have yet to prove a full downtrend. 1.1708 resistance from the 20-day SMA holds firm. For the second week in a row, sellers have failed to breach this important psychological level.
The 100-day SMA looms as a key resistance zone at around 1.1665. This only adds to the obstacles that the euro faces as it fights to recover. Traders, beware — EUR/USD is below the 20-week SMA as this line comes in just above 1.1662. Such a movement would further strengthen the bearish outlook. In addition, the 100- and 200-week SMAs are trending higher below the current price. That all shows a little resistance in the short term, but the longer term trends are still quite bullish.
Today’s bull run for market sentiment seems to be turning as the bullish momentum for EUR/USD starts to fade. The Relative Strength Index (RSI) is one of the sea of momentum oscillators. Currently, it sits just under 52, suggesting a very neutral outlook that could go bearish if things don’t start looking up soon. The continued vulnerability of the euro dollar is clear as traders to massively short trades quickly cover a sharp move below attractive technical support levels.
It’s becoming a deadly scenario. If it does break beneath the 200-day SMA at 1.1585, we might witness a deepened downside move. Should this support level break down, analysts are expecting increased selling pressure. They think the next major support zone will be at 1.1470. Such moves would constitute yet a further step in chipping away at confidence in the euro and risks sparking even deeper declines in the short run.
Traders and analysts have their eyes firmly fixed on coming economic bellwethers. They will continue to monitor geopolitical developments that may affect currency valuations. A sustained weekly close above the 20-week SMA could signal a potential reversal and reassert an upward trajectory for EUR/USD. Yet, with the current market dynamics still really under bearishness, being cautious is still the name of the game.
The situation becomes increasingly precarious as a break below the 200-day SMA at 1.1585 could pave the way for an extended decline. Should this support level fail, analysts predict that the next significant support area lies around 1.1470, which could lead to intensified selling pressure. Such developments would further undermine confidence in the euro and could trigger additional declines in the near term.
Outlook for the Upcoming Week
Looking ahead, traders and analysts will pay close attention to upcoming economic indicators and geopolitical developments that may influence currency valuations. A sustained weekly close above the 20-week SMA could signal a potential reversal and reassert an upward trajectory for EUR/USD. However, with current market dynamics leaning towards bearishness, caution remains paramount.