The EUR/USD pair is trading lower around 1.0730 in early European trading hours on Tuesday. This decline is attributed to a modest recovery in the US dollar, causing the major currency pair to lose ground. Traders are adopting a cautious stance, awaiting the release of the Eurozone Harmonized Index of Consumer Prices (HICP) inflation data and the US Retail Sales figures. Market expectations point to a 0.2% month-on-month rise in US Retail Sales for May.
Technical Analysis
On the 4-hour chart, EUR/USD maintains a bearish outlook, trading below the critical 100-period Exponential Moving Average (EMA). The downward momentum is further reinforced by the Relative Strength Index (RSI), which is positioned in the bearish zone near 43.0, indicating that the path of least resistance is downward.
Support and Resistance Levels
Initial Support: The first support level is at 1.0685, corresponding to the low of June 17.
Further Support: Should the pair break below 1.0685, the next target is 1.0665, aligning with the lower limit of the Bollinger Band. A further decline could see the pair drop to 1.0610, the low of April 19.
Immediate Resistance: On the upside, any sustained buying above an intraday high of 1.0741 could lead to a rally towards the crucial resistance zone between 1.0790 and 1.0800. This region is significant as it combines the upper boundary of the Bollinger Band and a key psychological level.
Further Upside Target: A break above 1.0800 would pave the way for a move towards 1.0852, the high of June 12.
Market Outlook
The current technical indicators suggest a bearish trend for the EUR/USD pair, with the RSI and EMA pointing towards continued downward pressure. The release of key economic data, namely the Eurozone HICP inflation and US Retail Sales, will be pivotal in determining the pair’s short-term direction. Traders are advised to monitor these developments closely as they could trigger significant volatility in the market.
In summary, while the EUR/USD pair faces bearish sentiment and technical indicators suggest further downside potential, upcoming economic data releases could shift the market dynamics, making cautious trading advisable.
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