EUR/USD Outlook: Rejection Near 1.17 Indicates Renewed Bearish Momentum
Originally published by The Tradable. Written by Alan Martinez.
The EUR/USD currency pair has recently faced a significant rejection near the 1.1700 psychological level, reinforcing the possibility of a renewed bearish trend in the short to medium term. This development is set against the backdrop of an evolving macroeconomic landscape, expectations regarding monetary policy from both sides of the Atlantic, and fluctuating risk sentiment in global markets. This article explores the technical and fundamental factors contributing to the latest movements in EUR/USD and provides a comprehensive forecast based on current market drivers.
Technical Rejection at 1.1700: A Key Inflection Point
The EUR/USD pair attempted a rebound over the past few sessions, climbing closer to the 1.1700 mark. However, the failure to sustainably break above this level signals strong resistance and revived selling pressure. This rejection may act as confirmation of a bearish continuation, especially given the broader technical structure.
Key technical observations:
– The 1.1700 zone has historically acted as a barrier, and repeated failures to close above it make it a significant resistance level.
– Momentum indicators such as the Relative Strength Index (RSI) are staying below the 50-neutral mark, reflecting persistent bearish pressure.
– Moving averages are painting a schematic consistent with downward momentum. The 50-day moving average is sloping downwards and resides above current market price levels, indicating that sellers remain in control.
– Repeated lower highs since earlier in the year signal the establishment of a longer-term bearish trendline that remains intact.
These indicators collectively suggest that the market is rejecting attempts to establish bullish upside beyond 1.1700. This provides a technical foundation for anticipating further downside.
Macro Factors Reinforcing the Euro’s Weakness
Beyond technical resistance, the EUR/USD pair’s downward trajectory is also being shaped by fundamental macroeconomic undercurrents. These include divergent monetary policy paths between the European Central Bank (ECB) and the Federal Reserve, persistently uneven economic growth, and relative differences in inflationary pressures across the Eurozone and the United States.
Key macro drivers impacting the EUR/USD outlook:
– The Federal Reserve remains on a hawkish trajectory, with policymakers vocal about maintaining interest rates at elevated levels given persistent core inflation above desired thresholds. The Fed’s tone has contributed to increased yield on U.S. Treasury notes, attracting capital inflows into the U.S. and strengthening the dollar.
– In contrast, the ECB has remained cautious due to the fragile state of economic recovery in Europe. Growth forecasts remain subdued, and inflation dynamics are uneven across member states, leading to hesitant tightening.
– Industrial and manufacturing output from Germany, which often serve as bellwethers for the broader Eurozone, have shown signs of stagnation or contraction, weighing on bullish hopes for the euro.
– In July’s ECB policy meeting, the Governing Council acknowledged the inflation moderation but warned of persistent downside risks to economic growth. Future guidance leaned toward data dependency, cautioning against premature tightening.
– Meanwhile, U.S. nonfarm payroll numbers remain robust, unemployment is near historic lows, and consumer spending is holding steady despite higher borrowing costs — all contributing to a favorable environment for dollar strength.
Geopolitical unrest and uncertainty, combined with energy price volatility in Europe, especially after Russia’s reduced gas flows to the European Union, further amplify hesitancy among euro bulls. As winter approaches and energy demand surges, energy security remains a serious issue for Eurozone countries.
Trading Sentiment and Market Positioning
Investor sentiment has also played a central role in the pair’s recent moves. Traders are increasingly cautious when it comes to long euro positions, especially in the absence of strong catalytic events that could provide support to the common currency.
Key points on market sentiment:
– According to the latest Commitment of Traders (COT) report, speculative long positions on the euro have declined sharply over the past month, indicating fading confidence in
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