Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1750.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1750.
- Add a stop-loss at 1.1400.
The EUR/USD exchange rate remained under pressure on Friday as traders reacted to the ongoing US government shutdown and the emerging trade war between the United States and China. It was trading at 1.1622, a few points above last week's low of 1.1540.
US Dollar Index Rises as Fear Spreads
The EUR/USD exchange rate has pulled back in the past few weeks as the US dollar has staged a recovery, with traders in the options market predicting more gains in the coming weeks.
The pair also dropped as a sense of fear spread in the market, with the Fear and Greed Index falling to the fear zone of 27. Similarly, the US stock market plunged, with the Dow Jones and the Nasdaq 100 indices falling by double digits.
The EUR/USD pair dropped as investors reacted to the ongoing trade war between the United States and China. Donald Trump announced that he would impose sweeping 130% tariffs on Chinese goods and put limits on critical software.
Trump's decision stemmed from recent actions by the Chinese government, including the failure to import soybeans from American farmers. Beijing also announced more targeted measures, including tariffs on ships coming from the United States and new limits on rare earth metals and magnets.
The new measures came as the two sides raised the stakes ahead of the upcoming meeting between Trump and Xi Jinping in South Korea later this month.
Looking ahead, the EUR/USD pair is expected to react to the upcoming statements from Federal Reserve members Christopher Waller and Susan Collins, who are scheduled to speak on Tuesday.
Most importantly, the pair will react to any new developments on the government shutdown and the ongoing trade war between the US and China.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has come under pressure in the past few days. It has jumped from the year-to-date high of 1.1920 to the current 1.1622.
The pair has moved below the 50-day moving average, while the Relative Strength Index (RSI) has dropped below the neutral point at 50. Meanwhile, the pair has bounced back above the key support at 1.1575, the highest swing in April.
Therefore, the pair’s outlook is bearish with a bearish bias. More downside will be confirmed when the pair moves below the lower side of the ascending channel. A move below this channel will point to more downside, potentially to the psychological point at 1.1400.
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