The EUR/USD exchange rate edged slightly higher, reaching approximately 1.0510 during the Asian trading session on Tuesday. However, negative sentiment remains prevalent as the pair trades beneath the 100-day Exponential Moving Average (EMA), combined with a bearish Relative Strength Index (RSI) indicating a lack of upward momentum. Traders have identified an initial support level at 1.0433, with immediate resistance appearing in the 1.0600 to 1.0610 range.
Despite the modest gains, the potential for further upward movement in the EUR/USD pair appears limited in light of the European Central Bank’s (ECB) stance on interest rates. The ECB has signaled its intention to lower rates further if inflation aligns with its target of 2%. Recent comments from ECB officials underline expectations of gradual cuts in borrowing costs as the eurozone grapples with economic challenges and decreasing inflation concerns.
A deeper analysis of the daily chart for the EUR/USD reflects an ongoing bearish trend. The price remains constrained below the critical 100-day EMA, which reinforces the downward pressure. An RSI reading around 42.90 further supports this bearish outlook, indicating that the path of least resistance likely favors a decline.
The Bollinger Bands add another layer of insight, with the lower limit positioned at 1.0433, serving as the first line of support. A significant drop below this threshold could lead the pair towards 1.0332, a level last seen on November 22, with potential for extended declines towards the psychological barrier around 1.0300 – 1.0290, marking lows from the end of November 2022.
Conversely, to the upside, the EUR/USD pair faces initial resistance in the 1.0600 – 1.0610 zone. A sustained break above this area could unlock further gains, with targets set at 1.0758, aligning with the 100-day EMA, and an ultimate aim towards the 1.0800 level.
