Original Article by: Arnab Shome
Source: The Tradable
Link: https://thetradable.com/fx/eurusd-turns-lower-below-11660-as-sellers-regain-control–v
Title: EUR/USD Slides Below 1.1660 as Bearish Momentum Builds
The Euro to US Dollar (EUR/USD) currency pair saw a sharp decline below the 1.1660 level recently, indicating renewed bearish sentiment in the forex market after a brief attempt at bullish recovery. The shift in momentum came as sellers regained control amid broader concerns around U.S. monetary tightening and the ongoing strength of the U.S. Dollar. As market dynamics continue to evolve, traders are closely watching key technical indicators and fundamental macroeconomic developments to assess whether further downside could be in store for this major forex pair.
This article provides a comprehensive analysis of the EUR/USD move, examining key technical levels, fundamental drivers, and what traders might expect moving forward.
Recent Price Action
– The EUR/USD pair started the trading week attempting to hold steady above the 1.1700 level, which was previously a strong psychological support.
– However, it faced stiff resistance as buyers failed to maintain upward traction.
– Sellers stepped in with increased volume, pushing the pair back below 1.1660.
– The most recent drop positions EUR/USD closer to its recent monthly lows and highlights the market’s bearish tone.
Key Drivers of the Pair’s Movement
Several fundamental and technical factors have contributed to the recent downward momentum in the EUR/USD forex pair:
1. Stronger US Dollar
– The U.S. Dollar has shown resilience due to economic resilience and the possibility of the Federal Reserve tightening monetary policy sooner than expected.
– Recent comments from Fed officials have indicated a greater likelihood of tapering asset purchases, which supports broader demand for the greenback.
– This hawkish sentiment continues to put pressure on other major currencies, including the Euro.
2. Divergence in Economic Recovery
– Economic indicators from the Eurozone have been more mixed compared to the relatively stronger data coming out of the United States.
– Growth forecasts for major European economies such as Germany, France, and Italy have been revised amid ongoing supply chain disruptions and energy supply concerns.
– Slower vaccination progress in some parts of Europe and new lockdowns due to COVID-19 variants have raised concerns about the pace of recovery in the region.
– In contrast, the U.S. economy has posted strong non-farm payroll data and stable consumer spending, reinforcing expectations of Fed policy adjustments.
3. Interest Rate Differentials
– A widening interest rate spread between U.S. and European benchmark rates favors the Dollar.
– Bond yields have moved higher in the U.S., while European yields remain subdued as the European Central Bank (ECB) maintains a dovish stance.
– The divergence has strengthened capital flows toward Dollar-denominated assets.
4. Technical Selling
– The break below 1.1660 activated key technical triggers as the level was considered critical support by market participants.
– Momentum indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) continue to indicate downward pressure.
– Failure to hold support levels has prompted algorithms and short-term traders to extend short positions.
Technical Analysis
Here are some of the major technical observations influencing EUR/USD sentiment:
– Immediate resistance is now located near the 1.1660-1.1670 region. A daily close above this area will be required for a short-term bullish reversal.
– Initial support lies at around 1.1610, with extended support levels seen at the September lows near 1.1565.
– The 50-day and 100-day moving averages are indicating a bearish crossover, suggesting continued downside over the medium term.
– Trendline analysis shows the pair is forming a descending channel, with sellers dominating every recovery attempt over the past month.
Ongoing Risks Affecting EUR/USD
Traders are also factoring in broader
Read more on EUR/USD trading.