EUR/USD Drifts Lower Amid Bearish Pressure: Technical and Fundamental Drivers
The euro-dollar pair faces renewed selling as inflation data, technical signals, and global sentiment weigh on price action. Analysts debate whether the downtrend will persist or if a rebound is on the horizon.
Recent Price Action: Bears Take Control
The EUR/USD pair has been under steady pressure, drifting lower to the 1.1100 region with minor losses through the latest trading sessions. The move marks a retreat from recent highs around 1.1200, with the euro hitting three-day lows near 1.1130 as sellers exploited a fragile technical landscape. Despite a softer University of Michigan consumer sentiment reading, the US dollar found support from rising inflation expectations, further weighing on the euro.
Key Drivers Behind the Decline
Mixed Economic Data
• US Inflation Expectations:
The University of Michigan’s inflation forecast jumped from 6.5% to a projected 7.7%, raising the prospect of more persistent price pressures in the US. This has lent support to the dollar, as markets anticipate that the Federal Reserve may keep policy tighter for longer.
• Eurozone Trade Balance:
The eurozone’s trade surplus is forecast to shrink from €24 billion to €17.5 billion, a development that could dampen euro demand and add to the pair’s bearish tone.
• US Macro Releases:
Recent US data showed softer producer price inflation and flat retail sales, but jobless claims remained steady, keeping the dollar on relatively firm footing.
Technical Breakdown
• Support and Resistance Levels:
The pair broke below the 1.1170 Fibonacci 50% retracement, exposing further downside to 1.1080 and potentially the 1.1000 psychological level. On the upside, resistance is seen at 1.1260-1.1270 (200-period SMA), 1.1290-1.1300 (100-period SMA), and 1.1380.
• Chart Patterns:
Technical analysis points to a bearish outlook for 2025, with the pair breaking below key moving averages and struggling to regain upward momentum. The RSI hovers near 50, indicating a lack of clear direction but with a bearish tilt.
Analyst Outlook: Is a Rebound Possible?
Despite the current bearish momentum, some analysts see potential for a rebound if economic data surprises or if the dollar weakens. For example, a spike in US inflation could paradoxically drive EUR/USD higher if it leads to concerns about US growth or policy missteps. Others note that the pair remains within a broad trading range, with a possible rebound toward 1.1320 if support holds and risk sentiment improves.
Longer-term forecasts remain mixed. While some project a return to parity if bearish pressure persists, others expect the pair to oscillate in a wide range between 1.0960 and 1.1790 through 2025, with periods of both strength and weakness for the euro.
Pivot Points and Trading Levels
The current support and resistance levels for the asset indicate key price zones traders are watching closely. The third level of support (S3) is positioned at 1.1040, while the corresponding resistance (R3) lies at 1.1283. The second support level (S2) stands at 1.1086, with resistance (R2) at 1.1255. Moving closer to the current market range, the first support level (S1) is at 1.1115, and the immediate resistance (R1) is at 1.1220. The pivot point, which often acts as a balance marker between bullish and bearish momentum, is calculated at 1.1161. These levels serve as critical indicators for potential price reversals or breakouts in the trading session.
These pivot points and support/resistance levels are closely watched by traders for potential reversal or breakout opportunities.
What to Watch Next
• US Economic Data:
Key releases including housing starts, building permits, and updated consumer sentiment will shape the dollar’s direction.
• Eurozone Developments:
Political uncertainty in Germany and France, as well as trade and inflation data, could influence the euro’s trajectory.
• Technical Triggers:
A sustained break below 1.1030 could open the door to further declines toward 1.0875-1.0895, while a move above 1.1290 would suggest a bullish reversal is underway.
Conclusion
EUR/USD remains under bearish pressure as technical and fundamental factors align against the pair. While the outlook for the coming weeks is cautious, volatility is likely as traders respond to new economic data and shifting global sentiment. Both bulls and bears should remain vigilant, as the pair’s next decisive move may hinge on upcoming macroeconomic surprises and evolving market dynamics.
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