They key factor dominating markets right now is last week's strong drop in the American stock market. This is often correlated with a strong US Dollar, but we now see the DXY (US Dollar Index) trading a bit lower. The key question facing traders in the EUR/USD currency pair now is whether the long-term bearish trend is done or does it have further to go?
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EUR/USD Fundamental/Sentimental Analysis
The Euro’s fundamental outlook is mixed, with expectations of further ECB tightening providing support while weak growth and elevated energy costs limit its upside. Inflation running at twice the ECB’s 2% target has strengthened the case for another rate increase in December, potentially improving the currency’s yield appeal. However, the ECB projects eurozone growth of just 0.9% in 2026, highlighting the economy’s vulnerability to an extended energy shock.
The US dollar’s fundamental outlook remains supported by resilient employment and expectations of further Federal Reserve tightening. October payrolls rose by 165,000 and unemployment fell to 4.1%, pushing market-implied odds of a December rate increase to roughly 80% and reinforcing the dollar’s yield appeal. Persistent inflation also favours a restrictive policy stance, with Fed officials continuing to signal that further hikes may be necessary.
We have an outlook that favours a further decline in the price.
EUR/USD Technical Analysis
The price closed very near the low of last week's range on Friday, after falling from another failed advance, painting a bearish technical picture. However, this week has opened with an advance which invalidated a nearby resistance level. This could be taken as a weakly bullish sign, but the advance has been neutral – certainly not impulsive, so I don't think it means much on what so far looks like a typically quiet Monday.
Given the valid long-term bearish trend, and the fundamental favouring of the USD, I expect lower prices, and the next resistance level at 1.1176 might hold convincingly – so far, it looks relatively strong.
EUR/USD Price Chart
My Take on EUR/USD
Short trades from bounces off the resistance levels could work out well. I would be happy to enter short from a bearish rejection of 1.1176 following a test. The area just above 1.1200 could also be interesting in the same way.
Review, Support & Resistance Levels
My previous EUR/USD signal on 3rd November was not triggered.
Risk 0.75%.
Trades may only be taken prior to 5pm London time today.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.1176, $1.1191, $1.1203, or $1.1226.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
Long entry following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.1128 or $1.1100.
Put the stop loss 1 pip below the local swing low.
Adjust the stop loss to break even once the trade is 20 pips in profit.
Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
There is nothing of high importance scheduled today concerning either the Euro or the USD.
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