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After what appeared to be a solid indication, the EUR/USD currency pair may be about to shift into a positive upwards trend, the two day run higher presented in the middle of last week has apparently run out of fuel – for the moment. The EUR/USD has reminded day traders that caution still reigns supreme and until a genuine resumption of bullish behavior is demonstrated against USD centric sentiment that continues to show the ability to remain strong, speculative bets need to carry a solid dose of risk management when betting on EUR upside.
EUR/USD’s Post-Election Rebound Fades as Support Faces Renewed Tests
The post U.S mid-term election buying spree which saw a significant amount of narrative in Forex in the middle of last week has hidden in a corner once again. The EUR/USD has shown an ability to be snapped backwards and tested lows on Friday before going into the weekend. Upon opening for trading early this morning not much has changed, the EUR/USD remains in a choppy anxious lower realm. Speculators may believe that this is actually a good thing if they carry a perspective that support levels have shown durability and a kick higher will occur.
However, timing the exact moment confidence will return in swarm formation within financial institutions may prove a difficult puzzle to solve short-term. Traders who are attracted to the temptation to look for upside may have to prove they have the capability of being patient. The EUR/USD will certainly look attractive to retail traders today, the question is how much faith do they have in a turnaround, or will they actually try to ride momentum lower?
Inflation and December Rate Uncertainty Keep EUR/USD Sentiment Cautious
The EUR/USD is near 1.11745 as of this writing. The trading has been quick this morning as reactions within the current realm are being tested. Additional volatility will arrive in a few hours when North American large players return from their weekends. Cautious financial markets are set to resume today and will likely last well into the whole week. Nervous equity indices are shadowing Forex because of the influence that comes via flirtations with U.S bond yields.
The cost of energy remains cautiously high, yes, WTI Crude Oil has fallen from its highest realms, but fears about sticky inflation remain via central bank attempts to maneuver interest rates in December. The EUR/USD which touched the 1.12740 ratio on Wednesday of last week may look oversold, but the moves lower on Thursday and last Friday have not been escaped quite yet. Looking for upside in current values is tempting, but perhaps this should be done by conservative traders when moves lower have happened and support appears durable.
Rising Support and Firmer Equities Could Lend the Recovery Credibility
Traders who like to ride momentum and feel the EUR/USD has a legitimate chance of staging a comeback and can endure intraday volatility may set their targets higher. The 1.11800 to 1.11900 may in fact be able to find trajectory today, but this will likely need the help of positive influence growing in equity indices. If the global equities appear to be taking on more risk (producing buying and rising values) this could be a good signal for the EUR/USD prospects.
Watching futures values of the Nasdaq 100 and S&P 500 could prove to be dynamic barometers in the coming hours. The question is where support proves that it is durable, and perhaps even better for bullish EUR/USD traders would be a signal that support levels technically are incrementally climbing via chosen timeframes.
EUR/USD Price Chart – Snaps Lower
Renewed Selling and Geopolitical Risks Leave Further Downside in View
The slump lower in the EUR/USD has to be taken seriously. The resumption of another dive by the EUR/USD is solid reminder that cautious sentiment still remains bona fide and needs to be given respect. Traders who believe the EUR/USD is oversold will eventually be proven right and momentum will begin upwards, but there is no promise when this is going to happen. And the potential of further military escalation in the Middle East serves as another headwind against notions about getting too positive regarding speculative buying positions in the EUR/USD.
EUR/USD Short-Term Outlook: Support Remains a Test of Confidence
EUR/USD’s response around support at 1.11730 may help clarify whether the latest retreat is stabilising. Holding this level and establishing progressively higher support would lend the recovery more credibility, particularly if equity market sentiment improves. Nearby resistance at 1.11830 remains the first reference point, with 1.12100 a higher level to watch if upward momentum develops.
A sustained move below support would instead bring 1.11485 into focus. With recent rebounds giving way to renewed selling, the distinction remains between a temporary bounce and a recovery that can hold its ground.
Key Levels to Watch
- Immediate resistance: 1.11830
- Immediate support: 1.11730
- Higher reference level: 1.12100
- Lower reference level: 1.11485