The EUR/USD currency pair is by far the world’s most actively traded, longest currency pair. It did close the week at around 1.1636 however, which is still a 0.7% loss. This drop answers to a strong bearish impetus since the USD continues to rule the forex markets. The EUR/USD is the second most traded currency pair on the planet. It accounts for approximately 30% of all foreign exchange transactions while averaging a staggering $2.2 trillion in daily turnover.
As the week went on, EUR/USD remained under pressure, peaking on the day at 1.1662 before reversing. Traders are starting to panic over this extended move lower. This concern deepened when the duo broke through a handful of notable support levels, the 100-day and 50-day Simple Moving Averages (SMAs) at 1.1663 and 1.1641 respectively.
Technical Analysis Signals Bearish Momentum
Current technical picture for EUR/USD is a neutral to downwards bias as bearish momentum has accelerated. The initial key support level is at 1.1600. Analysts caution that if this level gives way, we may quickly fall toward the 200-day SMA at 1.1565, the final bastion for bullish speculators.
Buyers are working to regain ground above the 50 and 100-day SMAs. If they do manage to breakthrough, 1.1700 would present the next level of resistance for them to try and overcome. Taking out this key level would bring the 20-day SMA at 1.1730 back into traders’ line of sight. In the opposite direction, more downside risks still lie under the big psychological mark of 1.1500 and the August 1 low of 1.1391.
Worsening economic sentiment from all the major Eurozone economies has been further exerting pressure on the euro. Germany, France, Italy, and Spain together account for roughly 75 percent of the Eurozone’s combined economic output. The performance of these two economies is arguably the most important driver for the development of the EUR/USD currency pair.
Economic Landscape and Interest Rates
The euro is the official currency of the 20 European Union member states of the Eurozone. Typically, higher interest rates would tip the balance in favor of the euro relative to its rivals. Recent market forces haven’t been kind to it. Traders are watching key economic indicators that will help tip the balance in favor of a stronger euro or a weaker euro.
Atlanta’s Fed President Raphael Bostic recently remarked on the economic recovery, stating that it “will take more time to make up for missing reports from last fall.” Together, these observations show a complicated dual relationship between U.S. monetary policy and euro-related economic outlook. This dynamic has a big impact on forex trading strategies for EUR/USD.
Market Sentiment and Future Outlook
With a market sentiment that continues to change, traders are on the defensive as economic conditions and geopolitical tensions fluctuate. Last week’s rout in the EUR/USD currency pair sent tremors across markets. Sentiment may shift quickly as traders are forced to constantly rethink their positions while treading these tumultuous waters.