EUR/USD continues to tumble for the fifth consecutive week. At the time of writing, the EURUSD pair is down 0.7% on the daily chart and is trading at $1.087. Seemingly, the price is on its way to retesting the $1.084 support level, as it stands only 0.3% above that level.
A reason behind the weakening euro seems to be the increasing strength of the dollar. The recent announcement of positive retail sales by the US pushed the DXY index upwards to new monthly highs. The dollar index is currently sitting comfortably 3.5% above the July low.
EURUSD May Drop More Amid Rate Hike Expectations
Earlier this week, the US announced a 0.7% increase in retail sales, beating the 0.4% analyst expectations by a landslide. This paves the way for more rate hikes as the recent data suggests that consumers still have strong purchasing power. This rate hike may act as a strong catalyst to push the DXY index higher, weakening the euro and other major currencies.
The European economy continues to see headwinds due to rising inflation and high-interest rates. On Thursday, the latest economic data from the Netherlands showed that the country has entered into recession.
EUR/USD To Retest Bottom Of Ascending Channel
The price chart for EUR/USD shows that the currency pair has been trading in an ascending channel since February 2023. Currently, the pair is about to retest the bottom of the channel and the fib level of 0.786. Before that level, EURUSD may also find some support from the demand level at $1.084.
The chart also shows the pair respecting a downward trendline. If the price breaks above the trendline, a bounce can be expected. However, a higher chance of a bounce can be expected from the $1.084 support level due to a confluence with the 0.618 fib level.
In the meantime, I’ll keep sharing updated EUR/USD forecast and my personal trades on my Twitter, where you are welcome to follow me.
