The EUR/USD pair attracts heavy selling for the second straight day and dives to a nearly four-week trough, around the 1.1670 region, during the Asian session on Monday. Bearish traders now await a sustained break below the 100-day Simple Moving Average (SMA) before positioning for an extension of the recent pullback from a three-month top, or levels just above the 1.1800 mark touched on December 24.
Rising geopolitical tensions assist the safe-haven US Dollar (USD) to capitalize on its recent recovery from its lowest level since early October, which, in turn, exerts pressure on the EUR/USD pair. That said, dovish US Federal Reserve (Fed) expectations might cap gains for the USD. Furthermore, the growing acceptance that the European Central Bank (ECB) is done cutting rates could support the shared currency and the currency pair.
On the daily chart, the Moving Average Convergence Divergence (MACD) line slips below the Signal line and sits under the zero mark. The negative histogram widens, suggesting building bearish momentum. The Relative Strength Index (RSI) prints 44, below the 50 midline, indicating fading upside impetus. Initial support aligns at the 100-day SMA at 1.1666; holding above it would help contain downside pressures for the EUR/USD pair.
Meanwhile, the gently rising 100-day SMA continues to underpin the broader bias, though a daily close beneath it would tilt the tone back in favor of sellers. Until that gives way, dips could remain contained above the average. MACD’s placement below zero and beneath its Signal line reinforces a corrective phase. A hold over the 100-day SMA could stabilize the EUR/USD pair, though an RSI recovery above 50 is needed to reassert bullish momentum.
(The technical analysis of this story was written with the help of an AI tool)
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.