The EUR/USD exchange rate appears to be having a rough week. After a strong run in April 2023, Euro to USD appears to be losing momentum. The latest analysis suggests that the pair may slide a lot more before a potential rebound. The dollar strength index will be the key for EURUSD in the coming weeks.
On Friday, EUR/USD was trading at a 0.07% loss at the start of its London session. This marked the second consecutive red day for the pair while putting the overall weekly drop at 0.98%. In this article, we discuss the factors behind the drop while also taking a shot at predicting its future price action.
EUR To USD Tumbles Despite Rate Hike
After a 25 bps rate hike by the US Federal Reserve, European Central Bank (ECB) also announced a similar hike last week. However, the EUR/USD pair tumbled despite the rate hike as the Euro weakened in terms of the greenback.
The major headwind for Euro turned out to be a big bounce in the DXY index, which rose 0.64% on Thursday. This was the biggest daily gain by the dollar strength index since March 15. Consequently, the EURUSD plummeted to its fresh monthly lows, and the downtrend continued on Friday.
EUR/USD Hangs By A Thread
The EUR to USD exchange rate failed to gain any strength above the 1.10 level even after several attempts. The following chart shows that the price got rejected every time it tried to break above the level. After three failed attempts, the pair appears to have formed the triple-top pattern, which is a bearish reversal pattern.
EUR/USD forecast will flip bearish if the price loses its 1.09 support. In such an event, I expect a price to retest the 1.08 level, which comes from the confluence of 0.5 fib level and support on a daily timeframe. A strong bounce in the DXY index can fuel such a bearish move.
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