Usman Salis
EUR/USD continues its downward trend, hovering below 1.0900 as investors anticipate the European Central Bank's monetary policy decisions.
EUR/USD Trades at Two-Month Low Below 1.0900
The EUR/USD pair remains under modest bearish pressure, trading at its lowest level in more than two months. On Wednesday, the pair dipped below the 1.0900 mark, struggling to find support as markets await the European Central Bank's (ECB) monetary policy decisions. This follows Tuesday’s slight losses for the Euro, with the economic calendar on Wednesday providing little in the way of high-impact data releases.
With the broader market mood shifting negatively, the US Dollar (USD) has remained resilient, further limiting the EUR/USD's ability to stage any meaningful recovery. Traders are likely holding off on significant moves ahead of Thursday’s ECB announcements, which are expected to have a major impact on the pair.
ECB Decision Looms Over EUR/USD
The EUR/USD remains in limbo as investors brace for the ECB's policy meeting on Thursday. The consensus among analysts is that the ECB could lower its key interest rates by 25 basis points, given recent Eurozone data suggesting disinflation and slowing economic activity. This anticipation has driven investors to take a cautious approach, resulting in limited bets on the Euro's potential for an extended selloff before the ECB’s decision.
The market's attention is also focused on how the US Dollar is performing in the face of mixed risk sentiment, particularly as US stock index futures saw varied performances early on Wednesday.
EUR/USD Technical Analysis: Eyes on Key Support
From a technical standpoint, the EUR/USD pair is signaling potential for a brief correction. The Relative Strength Index (RSI) on the 4-hour chart hovers slightly below 30, hinting at the possibility of a short-term technical rebound before the downtrend continues.
Immediate support is seen at the Fibonacci 78.6% retracement level at 1.0870. Should the EUR/USD fall below this support and start using it as resistance, technical sellers may continue to dominate. If this bearish scenario plays out, the next support levels will likely be at 1.0800 and 1.0780—the latter marking the starting point of the latest uptrend.
Key Resistance Levels for EUR/USD Recovery
On the upside, reclaiming the 1.0900 level could provide EUR/USD with some breathing room, possibly allowing sellers to step aside and opening the door for a recovery. In such a case, the first resistance would emerge at 1.0950, which aligns with the Fibonacci 61.8% retracement level. Beyond that, the 1.1000 mark, corresponding to the Fibonacci 50% retracement, would serve as the next critical resistance level for traders to watch.
As the ECB decision approaches, all eyes will remain on how EUR/USD navigates these key technical and psychological thresholds.
Conclusion
The EUR/USD is in a precarious position, with technical indicators suggesting the potential for both a short-term correction and further downside. Investors are treading carefully ahead of the ECB's policy decision, which will likely provide clearer direction for the pair. As it stands, the Euro is facing significant resistance, while support levels below 1.0900 may be tested in the days ahead. Traders will need to watch the interplay of risk sentiment, ECB announcements, and technical signals closely.
Usman Salis
