The EUR/USD pair initiates the new week with a restrained tone, oscillating within a narrow band around the mid-1.0600s during the Asian session. This comes on the heels of it touching its lowest point since March just last week.
The US Dollar (USD) maintains its strength, perched near a six-month high. The elevated US Treasury bond yields underpin this robustness, bolstered by the Federal Reserve’s hawkish stance. That predicts fewer rate cuts in 2024. Conversely, the Euro contends with the aftermath of the European Central Bank’s dovish rate decision, further suppressing the EUR/USD pair.
From a technical standpoint, the sustained decline from the 1.1275 peak in July has followed a clear downward-sloping channel. This suggests a well-established bearish trajectory. Additionally, daily chart oscillators remain deeply in negative territory, a far cry from oversold conditions.
Hence, a potential descent towards the 1.0600 level en route to the ascending channel support at 1.0560-1.0555 appears plausible. A continued sell-off could signify a fresh bearish breakout, extending the pair’s two-month-long downtrend.
On the upside, a recovery past 1.0670 might face formidable resistance near 1.0700, followed by last week’s high at around 1.0735. A decisive breach here could propel the EUR/USD pair toward the 1.0780 hurdle, marking the upper boundary of the aforementioned channel. An assured breakout, culminating in a move beyond 1.0800, would signal a potential near-term bottom and set the stage for significant appreciation.
For traders, selling the EUR/USD pair with a take-profit at 1.0600 and a stop-loss at 1.0750 could be a prudent strategy. Conversely, a bullish approach involves setting a buy-stop at 1.0670, aiming for a take-profit at 1.0750, and implementing a stop-loss at 1.0600.
The EUR/USD exchange rate remains subdued, hovering near the lowest level since March. At 1.0640, it significantly trails this year’s high of 1.1280. The pair has been entrenched in a strong bearish trend in recent weeks, amplified by the Federal Reserve’s hawkish stance.
Central banks grapple with mounting challenges, including resurging inflation and supply chain disruptions. Strikes by UAW workers in the US are poised to impact vehicle prices, while the Panama Canal bottleneck intensifies logistical strains.
The EUR/USD pair is ensconced below the 50-period moving average and critical resistance at 1.0834. The RSI has dipped below the neutrality threshold of 50, forming a small bearish flag pattern. These factors suggest a continued downward trajectory, with 1.0600 as a pivotal psychological level in focus.
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