EUR Recovery on Weakening USD Proved to Become Short-Lived

EURUSD lost 0.4% to 1.0891. Technical charts show that EURUSD has room to drop further, despite current USD weakness. Last week, the currency pair broke below the July low of 1.0900 and dipped slightly below the 55-day exponential moving average (EMA55) around 1.0912.

Nevertheless, the EURUSD downward momentum has not strengthened much ever since and its decline is approaching the oversold zone, so the pace of any decline is expected to be relatively gradual, so that the next meaningful support is at the late February 2024 low around 1.0807.

In the meantime, ECB policymakers are increasingly concerned about weakening economic growth prospects, while future policy debate is still open. However, it appears that the Euro's recovery against the Dollar has reached its peak, and there are indications of a downward trend in the ongoing week. So the strength of the Euro observed in the previous week has likely come to an end, resulting in a slight increase in bearish momentum.

The Euro to Dollar exchange rate experienced a 0.60% decline last Thursday, marking a significant shift in technical analysis. Prior to this, the Euro-Dollar pair was in a short-term uptrend, suggesting a potential test of the 1.096 level in the future. Over the next few days, if the EUR remains below 1.0950, it is expected to continue trading with a downward bias.