EUR/USD: Limited Recovery Indicates Persistent Bearish Control

The EUR/USD currency pair experienced a decline on Tuesday morning, reversing nearly half of the previous day's gains, which were fueled by President Trump's announcement to hold off on implementing tariffs initially planned for immediate action.

This brief upward movement in the market seems to be losing momentum, as the recovery was limited and restrained by a significant resistance level at the Fibonacci 23.6% retracement point from the range of 1.1214 to 1.0177, which is at 1.0422. This level has repeatedly capped any recent recovery attempts.

From a technical perspective, the overall outlook remains predominantly bearish. This suggests that the larger bearish forces are likely to resume control following this consolidation phase. The downward pressure is further evident with the declining daily cloud between 1.0555 and 1.0690, which continues to affect price movements.

Adding to the negative sentiment, the appearance of a death cross between the 100-day and 200-day moving averages signals further bearish momentum. Additionally, the relative strength index (RSI) has dipped below the neutrality level, indicating a potential for more downward movement.

In the near term, the bias is anticipated to remain bearish, particularly as long as prices stay below the Fibonacci resistance at 1.0422.

On the fundamental side, the Eurozone's economic environment is not looking favorable. The bloc is struggling to show signs of recovery while facing ongoing political uncertainty, dramatically compounded by challenges stemming from President Trump's administration. The looming threat of tariffs on all EU exports to the U.S. due to the trade deficit—something Trump aims to rectify—poses a significant concern for the EU. This situation unfolds as Europe seeks to strengthen its ties with the U.S. while grappling with high energy costs and contributing to the ongoing war in Ukraine.

Overall, an extended consolidation phase seems to be the most likely short-term scenario, with trading expected to remain within the current range. It is anticipated that stronger upward movement will stall when approaching the base of the declining daily cloud before the dominant downward trend from the 2024 peak at 1.1214 resumes.

Resistance and Support Levels

Key resistance levels to watch include: 1.0422, 1.0478, 1.0534, and 1.0555. On the support side, significant levels are noted at 1.0305, 1.0260, 1.0224, and 1.0200.

EURUSD, Recovery, Bears