Top Regulated Brokers
EUR/USD is drifting lower again in early Tuesday trading, and at this point the pair is doing everything it can to hang on to the 1.1350 level. The overall tone remains soft, and quite frankly, every bounce continues to attract selling pressure rather quickly.
A big part of the backdrop is the same one traders have been dealing with for a while now: interest rates in the United States remain higher than they are in the euro area, and that continues to favor the US dollar. On top of that, there are still broader concerns about the European economy, especially if energy disruption becomes a bigger issue again.
That combination has kept the market leaning bearish. Buyers have shown up near 1.1350 more than once, but they have not done enough to change the bigger picture, and until that changes, rallies will probably continue to look like potential selling opportunities.
Why EUR/USD Support at 1.1350 Matters Now
The 1.1350 area is the part of the chart that traders need to pay close attention to, because it has offered support even as sentiment has turned increasingly cautious. If that floor finally gives way, then it opens the door to the next leg lower and confirms that sellers are still in firm control.
At the same time, this is still a headline-sensitive market. Any sign of progress in the Middle East could improve risk appetite and give the euro a short-term lift, even if that move ends up being more of a relief rally than a major trend change.
How Elevated US Yields Shape EUR/USD and Risk Appetite
The other major driver here is the bond market. Expectations around future Federal Reserve policy continue to shift, sometimes every few days, and that keeps US yields in focus because rising yields tend to support the dollar against lower-yielding currencies such as the euro.
If yields in the United States push higher again, that would strengthen the bearish case for EUR/USD. It would also reinforce the carry advantage in favor of the greenback, and that is something traders have been willing to chase across the currency market.
The Upside Scenario for EUR/USD if Headlines Improve
If the geopolitical situation calms down and energy flows stabilize, risk appetite could improve enough to help EUR/USD recover. In that case, the pair could work its way back toward the previous consolidation zone between 1.14 and 1.1850, although the 50-day EMA near 1.15 could offer resistance on the way up.
That is not the base case right now, but it is the alternative traders need to keep in mind. As things stand, the euro still looks vulnerable, and the market is waiting for either a breakdown below support or a credible reason to start buying risk again.
Key EUR/USD Signals Traders Should Watch This Week
For now, the story is fairly straightforward: watch Middle East headlines, watch US yields, and watch how EUR/USD behaves around 1.1350. Until one of those factors changes in a meaningful way, the path of least resistance still looks tilted to the downside.
Ready to trade our EUR/USD analysis? Here is our list of the best brokers worth reviewing.