Based on the original article by InvestingLive, here is a rewritten and expanded analysis of the USD following the recent US-EU trade agreement, incorporating technical trading insights and expanded market perspective:
Title: USD Weakens After US-EU Trade Deal: A Technical Analysis for Traders
Original Author: InvestingLive
The US dollar saw notable pressure following the announcement of a new trade agreement between the United States and the European Union. This move has sparked significant interest among forex traders, as the currency markets adjust to evolving macroeconomic realities and policy undertones implied by the deal.
In this article, we break down the technical view of the USD in major currency pairs, assess the implications of the US-EU trade announcement, and look at possible scenarios for traders in the coming sessions. We will also identify key levels, chart patterns, and momentum indicators to help guide your trading plan.
Background: The US-EU Trade Agreement and Its Influence on the USD
The newly announced trade agreement focuses on reducing trade tensions in key sectors while promoting fairer tariffs and improved bilateral commerce. Although the deal was met with optimism by market participants seeking geopolitical stability, the reaction in the FX market reflected a risk-on sentiment. Generally, trade de-escalation can lead to reduced demand for safe-haven assets like the US dollar as investors deploy capital into riskier assets.
Key takeaways about the US-EU trade deal’s initial market impact:
– The USD tends to weaken in response to progress in global trade talks, as risk sentiment improves.
– EUR/USD experienced an upward push as the euro found renewed strength on the back of the deal.
– The USD Index (DXY) dropped from recent highs as traders shifted exposure toward higher-yielding and undervalued risk-based currencies.
– Early technical failures at significant resistance zones signaled a potential for further USD downside if momentum is sustained.
EUR/USD Technical Setup
The EUR/USD pair responded strongly to the trade news, rallying above previous resistance levels. The pair’s technical structure has turned more bullish, suggesting positive momentum could extend in the short to medium term.
Key technical observations:
– Resistance at 1.0880 was broken decisively, with momentum carrying the pair toward the 1.0950 zone.
– The 50-day moving average has turned upward, supporting the bullish short-term trend.
– RSI (Relative Strength Index) entered bullish territory above the 60 level, indicating buyers are firmly in control.
– MACD (Moving Average Convergence Divergence) gave a bullish crossover, confirming upward momentum.
What traders should watch:
– A confirmed daily close above 1.0950 could open the path toward 1.1040, a Fibonacci retracement level from the previous bear trend.
– On the downside, 1.0820 acts as major support. Failure to hold this level may shift the structure back to neutral.
Traders may consider:
– Bullish swing positions targeting 1.1040 as long as 1.0820 support holds.
– Watching for pullbacks toward the 1.0880 region as potential re-entry opportunities.
USD/JPY Reaction and Technical Insights
While the EUR/USD surged, the USD/JPY moved slightly lower, reflecting softer dollar demand and a modest improvement in global risk appetite. Looking at price structure and momentum indicators, the pair seems to be losing steam within its recent range.
Technical outlook:
– The pair failed to hold above the key psychological level at 146.00, forming a short-term double top.
– RSI retraced from overbought levels and now shows a downward tilt below the 50 line.
– Price is trading near the 200-day moving average, a critical long-term support area.
Support and resistance levels:
– Immediate resistance lies at 145.60, followed by 146.40.
– Support lies at 143.80 and then deeper support at 141.90.
Trading insights:
– Bears may find opportunities on rallies toward the 145.50
Explore this further here: USD/JPY trading.