The EUR/USD exchange rate is correcting as the dollar strengthens on Wednesday. Major global currencies have rallied significantly in their dollar pairs due to the fall in the DXY index. The index tracks the strength of the US dollar in terms of 6 major currencies and has been in a downtrend since the banking crisis that unraveled in March 2023.
On Wednesday, EUR to USD rate fell b 0.28% during its London session. This resulted in a weekly drop of 0.48% for one of the most traded forex pairs. Our analysis shows that the pair is retesting a major trendline on its chart, which the bulls must hold.
Euro Shows Weakness Amid Rising DXY
Last week, the DXY index dropped to its lowest level in 12 months. Nevertheless, after dropping to the low of 100.79, the index reversed and now stands at 101.97. This bounce can be attributed to the rise in US yields and the increase in the weakness in the pound amid high inflation. The index still remains 3.68% down from its March highs.
This also resulted in a negative price action in EUR/USD pair, which was already facing headwinds due to the rising crude oil prices. This also means the first red week after four consecutive weeks of positive price action. The next FOMC meeting in the US will keep the pair in check in the coming weeks.
EUR/USD Retests Trendline
EUR to USD exchange rate hit its yearly high of 1.1075 last week and is currently 1.13% down from the highs. The 4-hourly chart shows that the 1.10 level has become a major resistance for the pair. It briefly broke above it last week but failed to gain any strength. In the coming days, another retest of the $1.10 level is likely.
A break above this resistance will make EUR/USD forecast very bullish for the coming months. Currently, the pair is retesting the trendline on the lower timeframe. A break below this trendline might result in a bigger correction. As long as the pair keeps trading above its 200 MA, bulls will stay in control.
I’ll keep sharing my updated price outlook on EUR/USD and other forex pairs in my free Telegram group, which you’re welcome to join.
