Forex Opinion & Analysis

EUR/USD Flounders Post Fed

EUR/USD managed to make a gain in May, after four consecutive months of declines, but thus far, June has proven to be a bad month in terms of performance. After opening at 1.07322, the pair recently hit a low of 1.03593 to trade near 1.0452.

Most recently, EUR/USD has come under pressure as the Fed seeks to tighten monetary policy more aggressively, significantly outpacing similar efforts outlined by the ECB. Fears of global recession and ongoing geopolitical concerns related to the war in Ukraine have also played unfavorably for the euro.

Technical View – EUR/USD

The technical setup very much mirrors the fundamentals. EUR/USD is trading well below the 200-day exponential moving average on 4-hour, daily, and weekly time frames. This makes placing long positions risky business for the average trader.

The May 30 swing high of 1.07870 failed to produce a subsequent series of higher lows and higher highs necessary to convince traders of a big change in prospects for the single currency. Moreover, the prior congestion zone between 1.0620 to 1.0480 has proven to be more of an area of resistance than support.

EUR/USD daily chart.

Whether you are a buyer or a seller, keep your eyes peeled for a successful break and retest or outright reject the 1.055 regions. The next obvious test to the upside will be the 1.06414 level, representing the 50% Fibonacci retracement level.

The next real test will be the 1.06464 level, representing the 50% Fibonacci retracement level between the Apr. 21 swing high and May 13 swing low. A break above this level may restore the confidence in a shift in trend to the upside.

Meanwhile, if the price were to slip below the May 12 low of 1.03538, the Jan 2017 low of 1.03402 could act as support before reaching 1.02712 and the 1.01304 level. Near parity remains a critical psychological support level, which, if broken, could see market capitulation, but the market is not there yet.     

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