Original article by Christian Borjon Valencia, FXStreet
Title: EUR/USD Price Forecast: Sustained Downside Pressure Builds Below 20-Day EMA Amid Rising US-EU Trade Tensions
The EUR/USD currency pair remains under gentle selling pressure as technical and fundamental factors weigh increasingly on the Euro. As of the latest trading sessions, the pair has shown signs of downward momentum, especially following a failure to reclaim higher price levels and a breach beneath its 20-day Exponential Moving Average (EMA). Geopolitical friction and trade-related uncertainty between the European Union and the United States further add to investor caution, pushing traders toward risk-averse strategies.
Current Market Environment
The Euro-Dollar exchange rate has faced increased volatility due to recent softening in Eurozone economic data, a relatively firm Greenback, and subdued risk appetite in financial markets. Tensions surrounding trade relationships between Europe and the United States have resurfaced, sparking concerns over potential disruptions and retaliatory tariffs. These external headwinds, combined with domestic economic struggles in Germany and France, have placed additional strain on the shared currency.
– Near-term pressure is visible as the pair struggles to hold above key technical levels
– The US Dollar remains supported by better-than-expected economic indicators and a relatively hawkish Federal Reserve stance
– Escalating transatlantic trade tensions are reducing investor sentiment toward the Euro
Technical Analysis of EUR/USD
The EUR/USD pair has recently dropped below its 20-day EMA, a short-term technical indicator that often reflects bullish or bearish momentum depending on the price relationship. The move below this average signals potential further downside ahead.
Key technical observations:
– The price holds below the 20-day EMA, which comes in at approximately 1.0790
– The 50-day EMA lies slightly above at 1.0807, serving as another hurdle for upward recovery
– Support below current price action appears around the 100-day EMA trendline, roughly situated at 1.0757
– More significant support can be located at the year-to-date low of 1.0665
The Relative Strength Index (RSI), a momentum oscillator, is currently trending downward, showing signs of weakening bullish conviction. With no signs of divergence at present, momentum appears to favor the bear camp.
Other important technical features:
– Bearish crossover between moving averages could signal a more sustained drop
– RSI remains below the 50 mid-line, confirming dominance by selling forces
– Price action lacks bullish structures or higher-lows that could suggest bottoming out
Fundamental Drivers of Price Action
1. US-EU Trade Frictions
Fresh concerns have emerged surrounding revised tariffs and trade barriers, particularly within automotive and agricultural sectors. The United States has hinted at introducing new duties on European steel and aluminum exports, while Brussels is considering countermeasures. The specter of a trade conflict is weighing on European assets broadly and causing the Euro to lose appeal as a safe investment vehicle.
Major concerns for EUR:
– Ongoing WTO disputes could spill over, creating a prolonged period of policy uncertainty
– European companies face higher costs if tariffs are enforced, reducing profit margins and foreign demand
– Investor confidence in the Eurozone growth outlook may erode further under protectionist policy threat
2. Macroeconomic Divergence Between the US and Eurozone
While the United States economy continues to post relatively resilient performance indicators, the Eurozone economy is lagging. Recent figures have shown faltering industrial activity in Germany, stagnant growth in southern European nations, and persistent inflation pressures. These imbalances are causing monetary policymaker hesitation in the European Central Bank, compared to a data-driven but ultimately firmer policy stance from the Federal Reserve.
US Economic Context:
– Recent Non-Farm Payrolls data showed labor market resilience
– Core inflation remains sticky, supporting the case for elevated interest rates
– Federal Reserve officials have reiterated commitment to curbing inflation, even at the cost of short-term growth
Eurozone Economic Context:
– Germany
Read more on EUR/USD trading.