EUR/USD Technical Analysis: Bearish Momentum Continues as Price Struggles Below Key Levels
The EUR/USD pair has been on a volatile path, with the price fluctuating around the 1.0800 mark as of the latest trading session. After snapping a four-day losing streak, the pair managed to regain some ground, climbing back above the 1.0800 level. However, this recovery has lacked strong bullish momentum, suggesting that the bears are still in control. The latest movement indicates that the market is currently under the influence of a neutral-to-bearish sentiment, as the pair continues to face significant resistance at the 1.0855 region and beyond.
Looking at the technicals, the recent breakdown below the 23.6% Fibonacci retracement of the recent rally from the February lows to the recent highs near 1.0955 has opened the door for further downside. A deeper pullback toward the 1.0725 area is increasingly likely, which is where the 38.2% Fibonacci retracement level and the 200-day simple moving average (SMA) converge. These levels, specifically the 200-day SMA around 1.0729, are crucial support zones that could provide a solid base for any potential rebound. However, a break below this area would be a decisive bearish signal, likely driving the pair further down toward the 1.0655 region, marking a potential 50% Fibonacci retracement level. This could bring EUR/USD to sub-1.0600 levels, pushing the pair into a more bearish trend.
The 1.0855 resistance level remains a key hurdle for any bullish attempts. If the pair can break above this level, we could see a short-covering rally that could push the price back toward 1.0900, with the potential to retest the 1.0955 region. However, any failure to break through this resistance would likely signal a continued downward trend, with the possibility of testing the 1.0700 support again. The pair's failure to break higher also shows a lack of conviction from buyers, despite some improvements in the Eurozone's economic indicators, such as stronger PMI data.
Key Levels to Watch in EUR/USD
On the technical front, the EUR/USD is struggling to hold above crucial support levels. The immediate support is found at 1.0790 and 1.0764, which align with the 20-day moving average and recent lows. If the price drops below these levels, the bearish scenario will gain more traction. The 1.0800 psychological level has provided some stability, but this may be temporary. Resistance is expected at 1.0830 and 1.0865, which should be closely monitored for any potential upward breakouts.
The Relative Strength Index (RSI) is currently at 59.26, reflecting a neutral stance with no clear direction in the short-term. The Stochastic Oscillator reading of 51.66 suggests that there is no strong momentum in either direction. However, the MACD indicator has issued a mild sell signal, hinting at a potential pause or consolidation before any significant move in either direction. Despite these mixed signals, the broader trend remains slightly bearish due to the inability of EUR/USD to maintain upward momentum after multiple rejections at the 1.0855 level.
US Dollar Impact and Economic Data
The US Dollar continues to exert pressure on the EUR/USD pair, with the US Dollar Index (DXY) hovering near 104.31. This comes after solid US PMI data for March, which indicated stronger-than-expected services sector growth, offsetting the weakness in manufacturing. The US Composite PMI rose from 51.6 to 53.5, reflecting robust business activity, with the services sector leading the charge. As a result, the dollar has strengthened, causing the EUR/USD pair to retreat from its recent highs.
Additionally, ECB signals are also adding to the mix. Recent comments from ECB officials indicate that interest rate cuts might be on the horizon, as inflation is expected to slow faster than anticipated. While this is seen as positive for the Euro, the market is still cautious, especially with the looming tariff-related uncertainties. As the US Dollar regains strength and with global trade tensions continuing to affect market sentiment, the outlook for the EUR/USD remains uncertain.
The EUR/USD Outlook: A Mixed Sentiment Amid Policy Changes
Looking ahead, the EUR/USD outlook remains clouded with mixed signals. The recent weakening of the Eurozone's economic data, particularly in the German services sector, has tempered the optimism surrounding the pair. Even though the Eurozone's PMI showed some positive movement, it fell short of expectations, reflecting the challenges the region faces. The outlook for EUR/USD will largely depend on the resolution of these trade concerns and the US Dollar's continued strength in the coming months. Investors should keep a close watch on upcoming economic releases, particularly from the US, as well as any new developments on the trade front.
The Impact of Trade Tariffs on EUR/USD
As we move into April 2025, the impact of US tariffs on the Eurozone and other countries is likely to weigh heavily on the EUR/USD pair. Former President Trump's comments about possibly exempting some countries from the tariffs have eased market fears for now, but uncertainty remains. The expected tariffs on automobile imports, especially the 25% tariffs on Canada and Mexico, could have significant consequences for the US economy, adding another layer of complexity to the EUR/USD forecast.
Despite the short-term volatility, the EUR/USD pair is expected to consolidate between the 1.0790 and 1.0860 range in the near term. The market's direction will depend on upcoming economic data and the evolving political landscape, particularly surrounding US trade policies. The current technical outlook shows a bearish bias, but the pair’s overall trajectory will depend on the broader global economic environment and any shifts in US Federal Reserve policies.
In conclusion, while the EUR/USD pair remains above key support levels, the ongoing dollar strength and mixed economic signals could keep the pair under pressure. Traders should remain vigilant and look for breakouts above 1.0855 or a failure to hold the 1.0790 level to determine the next significant move in the market. With all the technical, economic, and political factors at play, EUR/USD could continue to fluctuate within a narrow range until a clear directional bias emerges.
