EURUSD has recently been struggling for upside momentum as a reduction in trade tensions have boosted the dollar, and hopes for another ECB rate cut in June have weighed on the Euro.
This has seen a selloff in the world’s biggest FX pair from its 2025 highs at 1.1573 posted on April 21st, to a low of 1.1065 on May 12th, as US and China trade representatives outlined details of a significant reduction in tariffs on imports from each country, before eventually closing on Friday slightly higher at 1.1150.
Roll forward to the start of this new trading week and a downgrade to US government debt by rating agency Moody’s (last Friday) has seen a brief resurgence of the sell US assets trade, and while US stock indices recovered their initial losses into the close yesterday evening, the dollar has remained under pressure with EURUSD trading against a potential important technical level (more on this in the technical update below).
This leads us to ask the question, was the low seen on May 12th at 1.1065 a final capitulation of weak longs, and could a new up trend be developing again?
While further news flow on the topic of US government debt, including updates on progress through Congress of a Republican tax cut and spending bill, may continue to dominate the direction of EURUSD across the rest of the week, sentiment could also be impacted by Thursday's release of the May forward looking PMI surveys from the Eurozone (0900 BST) and US (1445 BST), which will provide traders with an insight into the current health of these two major economies.
The current technical outlook may also be important.
Technical Update: Focus on Fibonacci Retracements
Interestingly, the sell-off into the May 12th low at 1.1065 did approach what might have been classed as a support level at 1.1056, marked by the 61.8% Fibonacci retracement of March 27th to April 21st price strength.
As you can see from the chart below, it is the test of this price level that looks to have prompted the latest EURUSD recovery.
Resistance Focus:
Traders may well now be focusing on 1.1263, which is equal to the 38.2% Fibonacci retracement of the April 21st to May 12th 2025 price weakness, a level that was successful in holding, on a closing basis, yesterday’s attempt to push to higher price levels.
That said, successful closing breaks above 1.1263 while no guarantee of further price strength, might leave some traders looking for an extension of the current upside move, with the next resistance potentially standing at 1.1381, which is the higher 61.8% Fibonacci retracement.
Support Focus: What if 1.1263 Caps Further Gains?
It is equally possible the 1.1263 Fibonacci retracement resistance can continue to hold, even turn price activity lower once more.
With this in mind, we should perhaps monitor support at 1.1171, which is equal to half the latest recovery move. Closing breaks below this level might then lead to a more extended phase of price weakness towards the 1.1056 retracement support, possibly further if this in turn were to give way.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
This has seen a selloff in the world’s biggest FX pair from its 2025 highs at 1.1573 posted on April 21st, to a low of 1.1065 on May 12th, as US and China trade representatives outlined details of a significant reduction in tariffs on imports from each country, before eventually closing on Friday slightly higher at 1.1150.
Roll forward to the start of this new trading week and a downgrade to US government debt by rating agency Moody’s (last Friday) has seen a brief resurgence of the sell US assets trade, and while US stock indices recovered their initial losses into the close yesterday evening, the dollar has remained under pressure with EURUSD trading against a potential important technical level (more on this in the technical update below).
This leads us to ask the question, was the low seen on May 12th at 1.1065 a final capitulation of weak longs, and could a new up trend be developing again?
While further news flow on the topic of US government debt, including updates on progress through Congress of a Republican tax cut and spending bill, may continue to dominate the direction of EURUSD across the rest of the week, sentiment could also be impacted by Thursday's release of the May forward looking PMI surveys from the Eurozone (0900 BST) and US (1445 BST), which will provide traders with an insight into the current health of these two major economies.
The current technical outlook may also be important.
Technical Update: Focus on Fibonacci Retracements
Interestingly, the sell-off into the May 12th low at 1.1065 did approach what might have been classed as a support level at 1.1056, marked by the 61.8% Fibonacci retracement of March 27th to April 21st price strength.
As you can see from the chart below, it is the test of this price level that looks to have prompted the latest EURUSD recovery.
Resistance Focus:
Traders may well now be focusing on 1.1263, which is equal to the 38.2% Fibonacci retracement of the April 21st to May 12th 2025 price weakness, a level that was successful in holding, on a closing basis, yesterday’s attempt to push to higher price levels.
That said, successful closing breaks above 1.1263 while no guarantee of further price strength, might leave some traders looking for an extension of the current upside move, with the next resistance potentially standing at 1.1381, which is the higher 61.8% Fibonacci retracement.
Support Focus: What if 1.1263 Caps Further Gains?
It is equally possible the 1.1263 Fibonacci retracement resistance can continue to hold, even turn price activity lower once more.
With this in mind, we should perhaps monitor support at 1.1171, which is equal to half the latest recovery move. Closing breaks below this level might then lead to a more extended phase of price weakness towards the 1.1056 retracement support, possibly further if this in turn were to give way.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
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.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
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.