EUR/USD Bears Eye Lower Supports Amid Political Uncertainty and Central Bank Policies
Tuesday Market Overview:
The EUR/USD market movement today is influenced by a combination of political developments and central bank policies. Despite the uncertainty caused by President Joe Biden’s decision to withdraw from the presidential race, the US dollar has shown resilience and remains stable. This stability can be attributed to the dominant role of monetary policy decisions and interest rate differentials over political news in driving major currencies. The Dollar Index stands steady at 104.325, reflecting cautious market sentiment, while the euro is on a path to challenge significant support levels. Emerging markets in Asia might experience shifts influenced by US election outcomes, adding to the EUR/USD market dynamics.
Technical Analysis:
In the four-hour chart, the EUR/USD pair is approaching its one-month ascending trendline, forming a potential head and shoulders pattern. Sellers are currently challenging the short-term support at 1.08857. Breaking this level and completing the reversal pattern by breaching the neckline at 1.08754 could trigger a bearish move, targeting 1.08681 and 1.08570. Continued bearish momentum would bring 1.08484 into focus for sellers in the medium term. The price correction has dragged the market below the 34-period moving average, which now acts as a resistance.
Alternative Scenario:
If buyers manage to reclaim the 1.09024 resistance, the bearish pattern will be invalidated, and the market may shift back to a bullish outlook.
Key Levels:
Resistance Levels:
- Resistance 2: 1.09024
- Resistance 1: 1.08857
Current Price (at the time of analysis): 1.08852
Support Levels:
- Support 1: 1.08754
- Support 2: 1.08681
- Support 3: 1.08570
- Support 4: 1.08484
Impactful Events:
With a light economic agenda for Tuesday, key events include US existing home sales data and a two-year Treasury bond auction, which are of primary interest to investors.
Oscillators:
RSI (Relative Strength Index): Bearish, indicating sustained selling pressure.
MACD (Moving Average Convergence Divergence): Bearish, reinforcing the downward trend.
Moving Averages: Mixed, reflecting the current consolidation and potential for a breakout.
Conclusion:
The EUR/USD pair is under pressure as it nears key support levels amid political and economic uncertainties. A successful breach of the 1.08857 support and completion of the head and shoulders pattern could lead to further declines towards 1.08754, 1.08681, 1.08570, and 1.08484. However, a recovery above 1.09024 would negate the bearish scenario and suggest a return to bullish momentum.
Investors should monitor the US existing home sales data and the two-year Treasury bond auction for additional market direction. Staying attuned to these key events and technical levels will help traders navigate the current market environment effectively.
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