EUR/USD Declines to 1.1740 Fibonacci Support as US Dollar Maintains Strength
By The Tradable (Original article by The Tradable Staff, adapted and expanded)
The EUR/USD pair has recently fallen to a critical support level near 1.1740, driven largely by the continued strength of the US dollar in the foreign exchange markets. This level aligns with a significant Fibonacci retracement zone, serving as a technical floor in a broader correction that began after the pair retreated from its multi-month highs.
As of the latest market data, bearish pressure remains evident for the euro, particularly amid a supportive macroeconomic environment for the greenback. The following analysis discusses the reasons behind the euro’s weakness, the technical levels in play, and what traders can expect in the coming sessions.
Current Market Overview
– The EUR/USD pair has slipped to around 1.1740, shedding recent gains accumulated over the past month.
– The downturn is largely fueled by the dollar’s renewed momentum, driven by firming US economic data and market expectations of tapering by the Federal Reserve.
– This move places the currency pair at an important technical support zone, as traders continue to watch for signs of either a bounce or breakdown below this level.
Technical Analysis: Key Levels in Focus
The recent pullback has drawn the EUR/USD into a confluence area of support tied to the 38.2 percent Fibonacci retracement level, drawn from the swing low to high of the recent bullish wave. Technical traders are closely monitoring this area, as it represents a critical battleground between bulls and bears.
Major technical levels currently in focus include:
Support Levels
– 1.1740: The 38.2 percent Fibonacci retracement level, currently acting as short-term support.
– 1.1700: A psychological and historically significant support zone.
– 1.1660: July lows, and a possible downside target if the current support fails to hold.
Resistance Levels
– 1.1800: Minor resistance owing to previous price consolidation.
– 1.1830: A former support level turned resistance now.
– 1.1900: A significant level that aligns with the upper boundary of recent price action.
Technical Indicators
– The Relative Strength Index (RSI) is currently hovering near the midline, suggesting neither oversold nor overbought conditions. This indicates there may still be room for extended moves in either direction, depending on fundamental drivers.
– Moving averages — the 50-day EMA appears to be flattening out near 1.1800, and a continued dip below this level will confirm bearish momentum in the short term.
– MACD indicators are showing a bearish crossover, further validating downside pressure in the pair.
Fundamental Drivers Behind USD Strength
Several macroeconomic factors have recently boosted the US dollar at the expense of the euro:
1. Federal Reserve Stance on Monetary Policy
– The Federal Reserve has signaled increasing openness to scaling back its asset purchase program due to strong economic recovery signs.
– Although no specific tapering date has been announced, the tone in statements and minutes suggests a policy shift may occur sooner than earlier anticipated.
– Expectations of tightening monetary policy have led to strong inflows into the US dollar as investors adjust for higher yields.
2. Strong US Economic Data
– Several key indicators, such as non-farm payrolls, retail sales, and ISM services data, have exceeded market expectations.
– The labor market continues to exhibit improvement, reinforcing the Fed’s hands in potentially accelerating its policy normalization timeline.
– These developments have bolstered confidence in the ongoing US recovery, making the USD an attractive safe-haven asset.
3. European Central Bank’s Dovish Outlook
– By contrast, the European Central Bank (ECB) has adopted a more cautious tone, with President Christine Lagarde emphasizing the need for continued policy support.
– Inflation in the Eurozone has not reached the pace observed in the US, reducing pressure on
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