Title: Weekly EUR/USD Forex Analysis – A Technical and Fundamental Review
Author: Based on original analysis by Ken Chigbo, FXStreet
Source: https://www.fxstreet.com/analysis/weekly-forex-analysis-eur-usd-video-202508151606
The EUR/USD pair continued to navigate through a complex macroeconomic environment during the past week. Market participants closely monitored the interaction between underlying economic fundamentals and broader market sentiment, both of which heavily impacted short- and medium-term movements within the pair. Technical indicators further outlined key support and resistance levels, contributing to traders’ strategies in managing positions. This analysis provides a comprehensive breakdown of the EUR/USD currency pair, factoring in both technical chart structures and fundamental drivers.
Fundamental Overview
The performance of the euro relative to the US dollar over the week was influenced by multiple macroeconomic indicators, including central bank commentary, GDP readings, inflation expectations, and broader risk appetite across global markets. Here are the main fundamental takeaways:
European Central Bank (ECB) Stance:
– The ECB held its policy meeting, opting to keep interest rates unchanged, signaling a cautious outlook amid persistent inflation and sluggish economic activity.
– ECB President Christine Lagarde emphasized the bank’s data-dependent approach regarding future rate decisions, highlighting the need for sustained evidence of inflation convergence to target levels.
– Market expectations are shifting towards a potential ECB rate cut in the latter half of the year, especially if European growth remains restrained.
U.S. Economic Outlook:
– The United States published key macroeconomic data, showcasing mixed results.
– US GDP showed moderate growth, supporting the Federal Reserve’s narrative of a resilient economy despite elevated interest rates.
– Core inflation readings were slightly cooler than expected, leading to renewed speculation over the Fed potentially adjusting its monetary policy stance by mid-2024.
– Some Fed officials reiterated their commitment to a restrictive policy path until inflation convincingly returns to the 2 percent target.
Interest Rate Differentials and Their Impact:
– Diverging policy trajectories between the ECB and the Federal Reserve placed pressure on the euro relative to the US dollar.
– As US yields edged higher on the back of hawkish Fed comments, the US dollar gained strength.
– Meanwhile, subdued European yield levels weighed on euro sentiment, creating a drag on the pair.
Geopolitical and Risk Sentiment Factors:
– Geopolitical tensions related to ongoing conflicts and global trade uncertainties also influenced risk appetite.
– In times of market stress, the US dollar often benefits from safe-haven flows, contributing to euro weakness.
– With volatility resurfacing in equity and bond markets, traders tended toward more defensive currency plays, further supporting the greenback.
Technical View: EUR/USD Price Action Breakdown
Analyzing the EUR/USD chart, several key technical levels and chart patterns emerged that provided traders with valuable price guidance.
Price Action and Chart Tendencies:
– The weekly chart displayed a bearish bias, with the pair trading below key moving averages, including the 50-day simple moving average (SMA).
– EUR/USD failed to sustain rallies above the 1.0900 psychological level, experiencing repeated selling pressure on approaches to this zone.
– Price consistently respected downward-sloping trendlines connecting recent swing highs, suggesting bears are in control in the near term.
Support and Resistance Levels:
Several key areas of interest emerged on the technical chart:
Support Levels:
– 1.0780: A significant horizontal support level tested multiple times over recent sessions. A break below this level would signal increased selling momentum.
– 1.0720–1.0740: A demand zone where buyers previously emerged to push prices higher. If broken, it could act as strong resistance moving forward.
– 1.0650: Critical support in the medium-term framework. A decisive break below this area opens doors for deeper retracements toward pre-2023 flash crash levels.
Resistance Levels:
– 1.0900: A major psychological resistance level. Sellers displayed aggressive reactions each time the pair attempted to
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