The EUR/USD exchange rate is showing signs of weakness as it trades closer to the 1.0500 level at the start of the week. Following a period of recovery, the currency pair is encountering challenges in sustaining its upward momentum. A risk-averse market sentiment combined with recent comments from US President Donald Trump regarding BRICS nations has contributed to a stronger US Dollar.
Trump’s remarks over the weekend expressed concerns about the potential for BRICS nations to establish a currency that could rival the US dollar. He indicated that the countries involved should refrain from creating a new currency or backing substitutes for the US Dollar, warning of substantial tariffs if they fail to comply. This stance has heightened risk aversion among investors and strengthened the demand for the US Dollar at the beginning of the week.
In addition to geopolitical factors, US stock index futures reflect a cautious mood in the markets, with a slight decline noted. Investors are also awaiting critical economic data, specifically the ISM Manufacturing PMI for November. Predictions suggest that the PMI could rise to 47.5 from the previous 46.5. A positive outcome could bolster the USD further, while disappointing figures may initiate a temporary setback for the currency.
From a technical perspective, the EUR/USD pair displays a bearish sentiment, particularly with the Relative Strength Index (RSI) on the 4-hour chart dropping below the 50 level. The pair has consistently closed beneath the 100-period Simple Moving Average for the last three 4-hour candles, signalling potential declines. Immediate support levels are seen around 1.0500, with further support at 1.0440 and 1.0400. Conversely, resistance levels may emerge at 1.0550, 1.0610, and 1.0660, representing the levels to monitor in the coming days.
