Deciphering EUR/USD's Decline: Key Drivers & Chart Analysis
With EUR/USD reaching its lowest point since November, let's delve into the driving forces behind this downturn, identify critical levels to monitor, and analyse the lower timeframe price action.
Factors Driving the Decline
There are three key factors currently driving EUR/USD lower:
1. Sticky US Inflation:The US dollar is strengthening across the board due to higher than expected US inflation figures, causing traders to reverse bets on early interest rate cuts by the Federal Reserve (Fed).
2. Policy Divergence with ECB: With the European Central Bank (ECB) signalling interest rate cuts in June, a divergence in monetary policies is emerging between the Fed and ECB.
3. Rising Risk Aversion: Geopolitical tensions, such as fears of conflict between Iran and Israel, also contributed to the dollar's strength as it is considered a safe haven asset.
Daily Candle Chart Analysis: Breaking Key Support
Friday’s price action saw EUR/USD break and close below the cluster of swing lows that formed in December 2023, February 2024 and earlier this month.
This break of support is significant for two reasons:
1. Retest Potential: It sets the stage for a potential retest of the October 2023 lows, some 200 points below current levels.
2. Resistance Formation: The broken support level may act as resistance in the future, potentially creating a zone for short opportunities on pullbacks.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Candle Chart Analysis: Bear Flag Forming
Drilling down to the detail of the hourly candle chart reveals that EUR/USD is currently undergoing a pullback. The pullback has taken the form of a small ascending channel or bear flag.
Traders aiming to align with the prevailing momentum might consider selling on a break below the bear flag, with stop placements above its highs.
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Factors Driving the Decline
There are three key factors currently driving EUR/USD lower:
1. Sticky US Inflation:The US dollar is strengthening across the board due to higher than expected US inflation figures, causing traders to reverse bets on early interest rate cuts by the Federal Reserve (Fed).
2. Policy Divergence with ECB: With the European Central Bank (ECB) signalling interest rate cuts in June, a divergence in monetary policies is emerging between the Fed and ECB.
3. Rising Risk Aversion: Geopolitical tensions, such as fears of conflict between Iran and Israel, also contributed to the dollar's strength as it is considered a safe haven asset.
Daily Candle Chart Analysis: Breaking Key Support
Friday’s price action saw EUR/USD break and close below the cluster of swing lows that formed in December 2023, February 2024 and earlier this month.
This break of support is significant for two reasons:
1. Retest Potential: It sets the stage for a potential retest of the October 2023 lows, some 200 points below current levels.
2. Resistance Formation: The broken support level may act as resistance in the future, potentially creating a zone for short opportunities on pullbacks.
EUR/USD Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Candle Chart Analysis: Bear Flag Forming
Drilling down to the detail of the hourly candle chart reveals that EUR/USD is currently undergoing a pullback. The pullback has taken the form of a small ascending channel or bear flag.
Traders aiming to align with the prevailing momentum might consider selling on a break below the bear flag, with stop placements above its highs.
EUR/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.