Euro-Dollar Drops, But the Bulls Have Their Next Targets Sighted
- Written by: Gary Howes
Image © Adobe Images
The Euro has come under pressure in the final trading session of the week.
The Euro to Dollar exchange rate (EUR/USD) is now nearly half a per cent down on the day at 1.1319; however, bulls are still firmly in control and further gains are likely in the coming days and weeks.
Losses for the single currency look widespread and there is no definitive news behind the moves, but considering we are closing into month-end, some chop must be expected.
This random dance into the weekend and the new month offers near-term tactical opportunities, but for those of us with an eye on the bigger picture, Euro upside from here remains a preferred stance.
Fundamentals are helpful: there is simply too much U.S. policy uncertainty to back the Dollar, which continues to see its profile as a go-to currency eroded by an administration that is determined to steamroll any opposition to President Donald Trump's authority and agenda.
Amidst this, the Euro stands out as an obvious alternative asset with deep liquidity and institutional stability.
In this vein, the Euro was offered a hand by a U.S. appeals court on Thursday when it ruled that Trump's tariffs can proceed, overturning the suspension issued a day earlier in the Court of International Trade.
The suspension was a status quo reinforcement that offered the Dollar a shot of energy, but its suspension puts the market back into an uncertain environment that errs in favour of the Euro.
"EUR/USD continues to consolidate in a choppy range, but generally holding above the key moving averages and trend lines that still suggests that the path of least resistance is to the upside," says Fawad Razaqzada, Market Analyst at City Index.
He says the next key support area to watch is around 1.1210-1.1265 zone, as marked in light blue on the chart, shown below.
Image courtesy of City Index.
"Unless the EUR/USD breaks below here, the bulls will remain generally content with current price action and levels," he explains.
Resistance is now clearly established around 1.1400. Razaqzada says a decisive break above here is needed to pave the way for a run towards the April highs of 1.1570s, with 1.1500 handle being the interim stop ahead of that target.
