Forex Opinion & Analysis

EUR/USD Hits 1-Month Low, Short-Term Perspective Deteriorates

  EUR/USD -0.57% Add to/Remove from Watchlist Add to Watchlist Add Position

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The bearish pressure mounted on EUR/USD this week as the dollar benefitted from deteriorated market mood amid banking sectors concerns and US debt ceiling woes.

At the time of writing, the EUR/USD pair is trading at the 1.0855 area, posting a 0.54% daily loss after hitting a fresh one-month low of 1.0848. The pair fell four out of the five trading days this week, which left it on track to record a 1.5% weekly decline. The euro braces for its worst weekly performance versus the dollar since September.

The US dollar took a hit on Wednesday after data showed the US Consumer Price Index inflation rate came in lower than expected, boosting expectations of a pause by the Federal Reserve. However, later in the week, banking sector and debt ceiling discussions deteriorated market sentiment, benefiting the greenback.

EURUSD Weekly Chart

From a technical perspective, the EUR/USD maintains a slightly positive outlook on the weekly chart, as indicators remain in positive territory, although they have turned south. Still, the reiterated failure to overcome the 1.1100 resistance area is a negative sign for the pair in the medium term. 

On the daily chart, the outlook has deteriorated, favoring a deeper downward correction. Having broken below 1.0900, the EUR/USD now moves closer to testing the 100-day Simple Moving Average (SMA), which is reinforcing the 1.0800 psychological level. Loss of this area would likely trigger further losses, with 1.0715 as the next support level. 

On the other hand, the immediate pressure could dissipate if the EUR/USD pair manages to regain the 1.0900 area, which represents a longer-term Fibonacci resistance. Farther north, the next resistance level could be found at the 20-day SMA at the 1.0970 zone ahead of 1.1000 and the cycle highs at around 1.1090.

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