How to Trade the Euro vs. Dollar: Market Forecast and Technical Analysis

The euro/dollar currency pair is one of the most traded pairs in the global forex market. The euro has gained strength against the U.S. dollar in recent months, and the pair looks set to test the short-term resistance at 1.12. Chart patterns such as the head and shoulders pattern, double tops and basing patterns offer clues about the direction of the market. Let’s take a closer look at the technical background of the EUR/USD currency pair to better understand its movement over the coming months. What is the EUR/USD currency pair? The EUR/USD currency pair is the exchange rate of the euro against the U.S. dollar. The current value of the EUR/USD currency pair is $1.03.

What is driving the euro/dollar currency pair?

Over the past few months, the euro has strengthened against the U.S. dollar due to persistent concerns about the state of the global economy. This is particularly evident when we look at the economic data. While the U.S. economy continues to be robust, there are signs that growth could be starting to moderate. This is causing investors to seek a less risky asset such as the euro.

On the demand side, we should not rule out the role of political risk in the recent rise in the EUR/USD exchange rate. The upcoming U.S. presidential elections might cause investors to put their money in safe haven assets such as the Japanese yen or the Swiss franc. An increase in demand for the yen and the Swiss franc could contribute to the rise in the EUR/USD exchange rate.

EUR/USD: What’s next?

The euro/dollar currency pair is likely to continue rising over the short term. This is because the factors that are currently driving the pair are likely to continue doing so over the next few months. The U.S. economy continues to be strong, and this should bolster the greenback against all of its major trading partners. The rise in the value of the euro could provide some support for the embattled British pound. However, in the long run, the value of all three currencies is likely to remain under pressure due to their susceptibility to international trade tensions.

Technical overview

The EUR/USD currency pair is traded in the interbank market, and its main daily movement is based on the underlying sentiment of market players and macroeconomic news. The technical indicators show that the MACD, the histogram and the Signal line are all in the bearish zone. This means that the exchange rate is likely to decline. The 50-day and 100-day moving averages are also below the price, which indicates that the price is likely to decline. The oversold condition of the 200-day moving average and the negative divergence in the price action suggest that the upward trend could be ending soon.

Euro/dollar: The short-term outlook

In the short term, we expect the euro/dollar currency pair to trade in a range bound between 1.10000 and 1.05000. This is based on the Fibonacci analysis of the recent price action as well as the technical indicators. If the bears take a firm grip on the market, the pair could decline towards the short-term support at 1.0000. On the other hand, if the bulls regather strength, the pair could rise towards the resistance at 1.12000.

Euro/dollar: The long-term outlook

In the long term, the EUR/USD currency pair remains highly correlated with the outlook for the U.S. dollar. This is because the greenback serves as a safe haven currency, and one of the most widely held forms of wealth in the world. As mentioned above, however, the long-term trend remains under pressure due to the susceptibility of the U.S. dollar to international trade tensions. Therefore, while the EUR/USD exchange rate is likely to remain a key support, it is unlikely to dominate the forex market for very long.

EUR/USD: Trade strategy

The ideal entry point for a long position in the EUR/USD currency pair is at the price of 1.12000. The stop loss should be below the price of 1.10000. The reason for this is that the price is likely to rise towards 1.12000 in the near term, and the stop loss would prevent a small loss from turning into a bigger one. On the other hand, a stop loss below 1.10000 would indicate a buy, and the position would be profitable if the price rose above the stop loss. The ideal exit point for a short position would be at the price of 1.10000. The profit target would be the breakeven point, which is the price of 1.12000.

Key takeaway

The EUR/USD currency pair is highly correlated with the outlook for the U.S. dollar, which makes it a good indicator of the health of the U.S. economy. The technical indicators indicate that the pair could trade in a range between 1.10000 and 1.05000 in the near term, and it could continue to rise towards 1.12000 in the near term.

On the other hand, the long-term trend remains under pressure due to the susceptibility of the U.S. dollar to international trade tensions, and the price is likely to remain below the resistance at 1.12000 for longer term.

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