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EUR/USD retreats from over a one-week high amid reviving demand for the safe-haven USD.
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The technical setup still favours bearish traders and supports prospects for a further decline.
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Any strength beyond 1.0600 is likely to remain capped near the ascending channel barrier.
The EUR/USD pair opened the first day of a new week with a modestly bearish gap and snapped a three-day winning streak around 1.0600, or touched a weekly high on Friday. Spot prices remain bearish through the Asian session and are currently trading near the 1.0550 area or the daily low.
As investors digest the mixed US monthly jobs report released on Friday, fresh geopolitical tensions lend some support to the US dollar (USD) and act as a headwind for the EUR/USD pair. The USD is further underpinned by the prospect of further policy tightening by the Federal Reserve (Fed), which supports higher US Treasury bond yields. Apart from this, speculation of additional rate hikes by the European Central Bank (ECB) may contribute to capping the upside for the majors for the time being.
From a technical perspective, the recent decline from the 17-month peak reached in June has been in a descending channel and indicates a well-established downward trend. Furthermore, the death-cross, the 50-day simple moving average (SMA) falling below the 200-day SMA for the first time since July 2021, favors bearish traders. In addition to this, the oscillators on the daily chart – although recovered from the lows – are still holding in negative territory and suggest that the path of least resistance for the EUR/USD pair is to the downside.
The 1.0500 psychological mark, however, could act as immediate support and help limit the downside for spot prices. A credible break below the mentioned handle would reaffirm the bearish outlook and weaken the EUR/USD pair to retest the YTD low, near the 1.0450-1.0445 region last week. The downward trajectory may extend further towards challenging the ascending channel support, currently near the 1.0400 mark. Some follow-through selling will be seen as a new trigger for bearish traders.
On the flip side, momentum beyond the 1.0600 mark could get extended, though is more likely to remain capped near the top boundary of the aforementioned channel, currently around the 1.0640-1.0645 region. The latter should act as a key pivotal point, which if cleared decisively will suggest that the EUR/USD pair has formed a near-term bottom and shift the bias in favour of bullish traders.
EUR/USD daily chart
Technical levels to watch
EUR/USD
