EURUSD – Modest Recovery Signals Larger Bearish Momentum Prevails
EURUSD declined on Tuesday morning, erasing nearly half of Monday’s 1.3% rally, which was driven by President Trump’s decision to hold off on implementing tariffs, contrary to initial plans to impose them immediately.
The recent pause in the broader downtrend appears short-lived, as the correction was minor and repeatedly stalled at the solid resistance of 1.0422, marked by the 23.6% Fibonacci retracement of the 1.1214 to 1.0177 decline.
The overall technical outlook remains bearish, signaling that larger downward momentum is likely to resume after the current consolidation. The falling daily Ichimoku cloud (spanning 1.0555 to 1.0690) continues to exert pressure on the price action, while the formation of a 100/200DMA death cross reinforces negative signals. Additionally, the RSI has turned southward, slipping below neutral territory.
The near-term bias remains bearish as long as the action remains capped below the 1.0422 Fibonacci resistance.
Fundamentally, the Euro faces challenges from a struggling Eurozone economy, persistent political uncertainties, and the arrival of Donald Trump, which presents significant risks. The threat of broad tariffs on EU exports to the US, aimed at addressing the US trade deficit with the bloc, poses a serious challenge for the Eurozone, which is grappling with high energy prices and contributions to the war in Ukraine while seeking to strengthen ties with the US to avoid a worst-case scenario.
An extended consolidation within the current range appears likely in the near term, with stronger upticks expected to stall below the base of the falling daily cloud. This phase would precede a likely continuation of the broader downtrend from the 2024 peak at 1.1214.
Res: 1.0422; 1.0478; 1.0534; 1.0555
Sup: 1.0305; 1.0260; 1.0224; 1.0200