Euro Finds Support as Market Rebalances

Key Points:

• EUR/USD rises 0.1% to $1.1429 after recent lows but remains below the $1.15 level.
• Concerns persist over long-term impact of the trade deal on the eurozone economy.

The euro regained some footing on Thursday, climbing 0.1% to $1.1429, though it continues to trade below the psychologically important $1.15 level. The pair’s modest bounce comes after recent pressure driven by trader concerns that the U.S.-EU trade agreement favours Washington at the eurozone’s expense.

Our research desk noted that the recent euro weakness likely reflects a correction following an extended period of bullish positioning. This suggests that while short-term pressures may persist, downside risks could be contained as traders reassess fundamentals.

Technical Analysis

The pair opened around 1.14087 and plunged to a session low of 1.14002 early on 31 July, before rebounding modestly through 1.1437. However, since then, EURUSD has remained range-bound, drifting within a narrow band between 1.1400 and 1.1440 without clear directional strength.

Picture: EURUSD holds above 1.1400 after bounce, but momentum lacks strength, as seen on the VT Markets app

The moving averages (5, 10, 30) show a mixed picture. While the price is trading marginally above the short-term averages, the flattening slopes suggest the momentum is stalling. The 30-period MA has acted as a dynamic resistance during the latter part of the session, capping any attempt to trend higher.

The MACD also reflects indecision, hovering near the zero line with a lack of strong divergence. While histogram bars have recently flipped green, the MACD and signal lines remain flat and close together, which indicates low momentum and little trader commitment in either direction.

Support remains at 1.1400, a psychological and technical floor seen in the early session bounce. On the upside, resistance is building around 1.1440 and 1.1460. A break above this area could open the door to a push toward 1.1500, but this likely depends on macro news or USD volatility.

Cautious Forecast

EUR/USD is likely to remain range-bound between 1.1400 and 1.1450 in the short term, barring new economic data or policy surprises. A break below 1.1400 could open the door to 1.1350, while upside moves face resistance at 1.1460.

The broader trend will hinge on how the market digests the structural impact of the trade agreement and any forward guidance from the ECB.

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