EUR/USD Analysis

• 09 January, 2024 Ruchit Thakur

EUR/USD Analysis

Evening Update: After testing the 1.1150 zone, the EUR/USD dropped precipitously. Will it continue to break or reverse ?

On the weekly chart, the EUR/USD pair is currently trading below the 200 DMA after encountering strong resistance from the 1.1150 zone. Given that EUR/USD is 58% weighted in DXY, the strong increase in the Dollar Index was the main cause of the decline in EUR/USD. The Dollar Index was trading at a solid support zone of 100.50-100.80, as we covered in our study, and it strongly rebounded towards the 102.50 region.

• After a strong rejection, the EUR/USD fell below the 200 DMA.
• Based on the chart, the EUR/USD pair was forcefully rejected by the trendline and the 200 DMA; as a result, it may now move into the 1.07 and 1.05 zones, respectively.
• We may expect more decrease in the price of EUR/USD because the 200 DMA on the weekly chart is located close to 1.1150, the point where the 200 DMA converges with trendline resistance.

Please see the chart above, which illustrates the resistance in the EUR/USD and how it is positioned in relation to the weekly 200 DMA. The trendline resistance is the 1.1150 zone, and the EURUSD dropped quickly and is currently trading close to the 1.0950 zone. In our analysis of DXY, we noted that the Dollar Index was likely to rise from its current trading range of 100.50 to 100.80, which is a solid support zone. Since EUR/USD and the Dollar Index are inversely correlated, a rise in DXY will cause EUR/USD to decline and vice versa. Thus, the increase in DXY was mostly responsible for the loss in EUR/USD.

The EUR/USD pair may continue to decline, with more downside offered by the 1.0700 and 1.0500 zones. Given that the EUR/USD is inversely correlated with the Dollar Index, as was previously mentioned, DXY may increase to 1.0350 or 1.0400, respectively, which might lead to further declines in the EUR/USD.

Please examine the weekly chart's levels of support and resistance for the EUR/USD. Every level is shown in a spot chart.