EUR/USD Likely to Fall Further as Bull Trap Forms

EUR/USD Pair Struggles as US Dollar’s Resurgence Keeps Pressure

The EUR/USD pair is facing difficulty as the US dollar continues its resurgence, keeping the currency pair under pressure. While there has been a slight strengthening of the euro against the dollar, it is not enough to attract bullish interest at this stage. The market is seeking more price action to entice the bulls and change the current short-term downside-oriented trend. The path of least resistance for the EUR/USD pair remains to the downside, indicating a challenging period ahead.

Short-Term Trend Remains Downside-Oriented Amid Calm Market

The current market conditions in the early European trade appear to be calm, with a bounce back in major US indexes from their recent lows. However, despite the temporary calmness, the short-term trend for the EUR/USD pair remains downside-oriented. The selling pressure on risk assets, including the currency pair, could resume without a fundamental change in the current macro backdrop. This suggests that the calm market conditions may not last for long if the outlook does not improve.

Central Banks’ Reluctance to Cut Rates Could Intensify Selling Pressure

An important factor contributing to the EUR/USD pair’s struggle is the reluctance of major central banks, such as the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE), to reduce interest rates as anticipated by the markets. While the US economy’s relative strength is a reason for the Fed’s cautious approach, concerns about inflation and wage pressures are holding back rate cuts in the UK and Eurozone. The recent comments from ECB President Christine Lagarde indicating a potential delay in rate cuts further add to the selling pressure on the EUR/USD pair.

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Technical Analysis and Trade Ideas for EUR/USD

The EUR/USD pair has recently formed a small hammer candle, indicating a potential bullish signal. However, several bullish patterns have broken down this year, raising doubts about the sustainability of the recent uptick. The bulls need to see a higher high on the EUR/USD pair to gain confidence that a bottom has been formed. A break above the 1.0950 level could provide a bullish signal, as it would indicate a three-bar reversal pattern. Until such a pattern emerges, the near-term trend for the EUR/USD pair remains bearish. Key short-term resistance is seen just above the 1.09 handle, with aggressive bearish traders potentially entering at these levels. Conservative traders, on the other hand, may wait for further bearish price action before committing. A potential break below the support level at 1.0877 could trigger a move to lower levels, with the next downside targets being around 1.0815 and 1.0723.

Disclaimer: This article is for informational purposes only and does not constitute a solicitation, offer, advice, or recommendation to invest. Investors should evaluate assets from multiple viewpoints and be aware of the associated risks before making any investment decision. The article is not intended to incentivize the purchase of assets and does not hold any liability for investment choices made by readers.