Introduction:
The Euro (EUR) has been slipping against the US Dollar (USD) in recent sessions, with the pair trading in the 1.0930s during the European session on Wednesday. This represents a drop of a third of a percentage point on the day. This correction comes after the pair briefly reached year-to-date highs of 1.1075 on April 14. The pullback in the EUR/USD pair is being driven by a stronger US Dollar, as expectations crystalize that the Federal Reserve (Fed) will continue raising interest rates. In this article, we will explore the recent performance of the EUR/USD pair and discuss the factors driving the movement.
Factors Driving EUR/USD Movement:
The EUR/USD pair has been influenced by several factors in recent sessions. Firstly, the US Dollar has been gaining strength due to the expectation of continued interest rate hikes by the Fed. The Fed has been gradually increasing interest rates since 2015 and has signaled that it will continue this trend to keep inflation in check. This has led to investors buying the US Dollar, leading to a higher exchange rate against other currencies, including the Euro.
Secondly, concerns over the economic recovery in the Eurozone have also weighed on the Euro. The Eurozone has been hit hard by the COVID-19 pandemic, with several countries still struggling with high infection rates and slow vaccine rollout. The slow economic recovery in the region has led investors to sell the Euro, causing a drop in its value against the US Dollar.
Thirdly, political uncertainty in Europe has also contributed to the recent performance of the EUR/USD pair. The upcoming French presidential election in 2022 and the ongoing political crisis in Italy have created uncertainty in the Eurozone, which has led to a decrease in demand for the Euro.
Technical Analysis of EUR/USD Pair:
From a technical perspective, the EUR/USD pair is currently in a downtrend after reaching its year-to-date highs on April 14. The pair is trading below its 20-day moving average, which indicates a bearish sentiment. The Relative Strength Index (RSI) is also below 50, which indicates that the momentum is currently in favor of the bears. If the pair continues to trade below its 20-day moving average, it could drop further towards its next support level of 1.0800.
Conclusion:
The Euro has been slipping against the US Dollar in recent sessions due to a combination of factors, including the expectation of continued interest rate hikes by the Fed, concerns over the economic recovery in the Eurozone, and political uncertainty in Europe. From a technical perspective, the EUR/USD pair is currently in a downtrend and could drop further if it continues to trade below its 20-day moving average. As always, traders should keep an eye on economic data releases and any developments related to the Fed’s interest rate policy to gain a better understanding of the movement in the EUR/USD pair.
