Original article by Flavio Tosti, FXStreet
Rewritten and expanded version:
EUR/USD Price Forecast: Bearish Sentiment Strengthens Amid Heightened Trade Tensions
The euro is facing increasing pressure as EUR/USD moves lower, with bearish momentum gathering strength in the midst of intensifying global trade tensions. Risk-off sentiment has returned to the global financial markets, and this has been reflected in the downturn seen in the euro against the US dollar. Market participants are growing more cautious, seeking safe-haven assets such as the US dollar, while sentiment surrounding the eurozone economy continues to weaken.
The combination of fluctuating investor confidence, macroeconomic data pointing to potential stagnation in the eurozone, and mounting trade disputes — especially involving major global economies — has made the euro vulnerable to further downside. This article provides a detailed examination of the current state of the EUR/USD pair, fundamental and technical factors influencing its trajectory, and what the future may hold for Forex traders monitoring this currency pair.
Key Factors Pressuring the Euro
Several interrelated macro and geopolitical factors have been contributing to the bearish turn in EUR/USD:
• Trade Disputes Escalate: The aggressive rhetoric and actions stemming from ongoing trade conflicts between the world’s largest economies have sparked a global economic slowdown. The eurozone, already struggling with modest growth, is particularly vulnerable to these developments.
• Weak Eurozone Data: Recent economic indicators from across the eurozone have been disappointing. Industrial output, manufacturing Purchasing Managers’ Index (PMI) figures, and export data are all signaling a subdued economic environment. Germany, the EU’s leading economy, has seen substantial drops in production and export volumes.
• European Central Bank (ECB) Policy Outlook: With economic data weakening, market expectations are rising that the ECB may adopt a more dovish stance in upcoming meetings. President Christine Lagarde has acknowledged the risks to the eurozone economy, leaving the door open for further easing of monetary policy or delay in future rate hikes.
• US Dollar Strength: Simultaneously, the US dollar has gained traction amid global uncertainty. While the Federal Reserve has left rates steady, its relatively hawkish tone compared to the ECB supports a stronger USD. Safe-haven flows have intensified amid mounting tensions, further strengthening demand for the greenback.
• Risk Aversion Dominates Sentiment: Investors appear to be de-risking portfolios. As a result, risk-sensitive assets like the euro are being sold off in favor of safe havens. This risk aversion is not only linked to trade uncertainty but also broad-based concerns over economic growth, inflation, and central bank policy divergence.
EUR/USD Technical Outlook
EUR/USD has continued to exhibit pronounced weakness, failing to recover or establish strong support zones in the short to medium term. Technical indicators are confirming a bearish bias in the coming sessions and potentially beyond.
• Recent Price Action: The pair has been trapped in a descending channel, with each bounce being swiftly sold off. Resistance levels continue to cap any upside momentum. The critical 1.0900 level has been breached and markets are now eyeing lower supports.
• Support and Resistance Areas:
– Immediate resistance lies around 1.0920–1.0950 area
– A key technical support zone sits near 1.0750–1.0780
– Further support may be found at 1.0650 if the selling pressure intensifies
• Moving Averages: Both the 50-day and 200-day simple moving averages (SMA) are showing downward slopes. The death cross pattern observed earlier — where the 50-day SMA fell below the 200-day SMA — is holding, confirming long-term bearish momentum.
• RSI and Momentum Indicators: Relative Strength Index (RSI) remains below neutral, trending around 40. This suggests that sellers are in control. Momentum indicators, including the MACD histogram, show that downside pressure remains intact, with no bullish divergence visible as of yet.
• Fibonacci Retracement Analysis:
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