It was a second consecutive weekly loss for the EUR/USD currency cross. It indeed fell to a low of 1.1555 before closing around 1.1650. Recently, this movement has increased anxiety amongst traders with good reason, particularly as the pair approached key technical levels. EUR/USD’s recent price action demonstrates the nuanced interplay between macroeconomic fundamentals and geopolitical developments. These tensions have been exacerbated by US trade policies put in place by President Donald Trump.
Amid a cooling outlook in the market, the EUR/USD cross has gotten an excellent footing. Additionally, it is sitting close to the 61.8% Fibonacci retracement level of the June/July rally, at 1.1597. This support level has been very important, the pair has bounced sharply from there very quickly. These recent dips and jumps show that traders are nervously eyeing what looks like potential resistance and support levels that may help dictate where the price goes next.
Technical Analysis of EUR/USD
The technical indicators including EUR/USD are painted with a broad brush. The 20-week Simple Moving Average (SMA) is currently at about 1.1300. This level has been a major point of breakout for the currency pair. Movement past the high of 1.1686 will be an indication that a deeper recovery may be underway. Such move could push the duo up to next resistances at 1.1760 then 1.1830.
If EUR/USD dips below the 1.1590 region, it may extend its decline toward the historically strong static level of 1.1470. A clear break below the 1.1300 support level could leave the currency pair vulnerable to more losses, sending it to 1.1400. EUR/USD a daily chart closer up on the daily chart, with EUR/USD struggling to get above the 50% retracement level. At the same time, momentum indicators point to a negative trend.
The Momentum indicator has taken a significant plunge and is now closing in on its 100 line from the top. This encouraging movement implies more good news might be on the horizon. The Relative Strength Index (RSI) has moved up to near 52. This is a good sign of some positive momentum, albeit a tenuous one thanks to ongoing market volatility.
Impact of Geopolitical Factors
The second is that geopolitics have sharply increased, particularly because of American trade policy under President Trump. This will keep markets jittery, to say the least. Today, Trump’s trade war continues to have a huge impact on international currency pairs such as EUR/USD, and domestic markets are affected. His administration’s soon-to-be-completed trade deals with both India and the European Union could have even more of an impact on market dynamics.
The unknown of these negotiations is a very negative wildcard that adds to the volatility for traders. As this round of negotiations continues to play out, the market eagerly waits for any leaks, announcements, or developments. These would have profound effects on U.S. trade relations and currency valuation. Unexpected, disruptive changes in trade policy can overnight wreak havoc on market sentiment. That, in turn, has a huge impact on the path of the EUR/USD currency pair.
Macroeconomic Data Influences
Alongside geopolitical factors, macroeconomic data is expected to play a significant role in shaping the future of the EUR/USD pair. With key reports such as the US Durable Goods Orders and Germany’s IFO survey on Business Climate due, these promise to be illuminating indicators. Under different economic structures, these findings may counterintuitively affect currency movements.
The US Durable Goods Orders report is particularly critical as it reflects the health of the manufacturing sector and broader economic trends. A bullish report would likely improve confidence in the US dollar, allowing EUR/USD to drop further. On the flip side, bad data might be able to do the opposite—sinking the dollar and buoying the euro.
Germany’s IFO survey on Business Climate is another key indicator for traders to keep an eye on. With Germany the largest of all Europe’s economies – bigger even than that of France – its economic fortunes weigh heavily on the eurozone’s outlook. Better than expected numbers from this survey is likely to give a much needed boost to the euro vs the dollar and support for EUR/USD.