The EUR/USD pair is one of the most popular and liquid currency pairs in the forex market. It represents the exchange rate between the euro and the US dollar, which are the two largest economies and reserve currencies in the world. The pair is affected by various factors, such as interest rate differentials, economic data, political events, market sentiment, and risk appetite.
EUR/USD Price Analysis
The EUR/USD pair has been in a downtrend since the beginning of 2023, as the US dollar strengthened on the back of rising inflation expectations, hawkish Fed signals, and robust economic recovery. The pair broke below several support levels, such as 1.1200, 1.1000, and 1.0800, and reached a low of 1.0869 on May 5.
However, the pair found some buying interest near this level and started to rebound. The rebound was driven by several factors, such as:
– A weaker US dollar due to disappointing US jobs data, lower Treasury yields, and dovish Fed comments.
– A stronger euro due to improving Eurozone economic outlook, upbeat PMI data, and progress in vaccination campaigns.
– A shift in market sentiment from risk-off to risk-on, as fears of Covid-19 variants and geopolitical tensions eased.
As a result, the pair recovered above 1.0900 and climbed to 1.0934 on May 12, which is a key resistance level that coincides with the 23.6% Fibonacci retracement of the downtrend from 1.1204 to 1.0869.
How to Trade EUR/USD After Rebounding From Multi-Week Lows
The EUR/USD pair is currently trading in a range between 1.0900 and 1.0934, waiting for a clear direction. There are two possible scenarios for the pair:
– A breakout above 1.0934: This would signal a continuation of the rebound and open the door for further gains towards 1.0965 (38.2% Fibonacci retracement), 1.1000 (psychological level), and 1.1035 (50% Fibonacci retracement). To trade this scenario, one could buy the pair above 1.0934 with a stop-loss below 1.0900 and a target at 1.1000 or higher.
– A breakdown below 1.0900: This would signal a resumption of the downtrend and expose the next support levels at 1.0869 (recent low), 1.0800 (psychological level), and 1.0750 (78.6% Fibonacci retracement). To trade this scenario, one could sell the pair below 1.0900 with a stop-loss above 1.0934 and a target at 1.0800 or lower.
The best strategy to use depends on one’s risk appetite, trading style, time horizon, and market conditions. However, some general tips are:
– Use technical indicators, such as moving averages, trendlines, support and resistance levels, Fibonacci retracements, and oscillators, to identify entry and exit points.
– Use fundamental analysis, such as economic data releases, central bank statements, political events, and market sentiment indicators, to gauge the direction and strength of the underlying trend.
– Use risk management tools, such as stop-losses, take-profits, position sizing, and diversification, to protect your capital and maximize your profits.
