Summary: Euro/USD action remains constrained by the 50-day EMA and a descending trendline, with the dollar’s broad strength steering the pair lower. The speaker watches 1.15 and 1.14 as key downside levels and sees bullish potential only above 1.17–1.18.
EUR/USD
The euro initially tried to rally during Tuesday’s session but continues to struggle with the 50-day EMA, an indicator many traders use for medium-term momentum. There may also be a downtrend line forming, with three or possibly four touches on the way down. The euro itself is not necessarily a weak currency; it is simply not the US dollar. Much of this movement comes down to the dollar and how it has been behaving against almost everything. The euro is the closest approximation to the US dollar index without actually trading the index, so the alignment makes sense.
At this point, the euro looks as though it will go searching for the 1.15 level. If it falls below there, 1.14 will be targeted where the 200-day EMA sits. That is where the trend gets determined. Anything below there probably opens a move toward 1.11 and broad US dollar strength. So far, that has been the pattern since the FOMC meeting in September, when Jerome Powell was not as dovish as many anticipated. Since then, doubts have emerged about automatic interest-rate cuts in December. As long as that remains the case, it strengthens the dollar, but there could be something more ominous developing. There may be a US dollar shortage in the bond markets, showing that as people try to borrow more money, they eventually pay more interest and then have to exit their loans. Most of these loans or bonds are in US dollars, so it perpetuates the cycle.
This market does not look bullish until it breaks above 1.17, and even then, waiting for a break above 1.18 would be preferable for a larger move. As things stand, rallies likely continue to fade, and the pair may drift a bit lower.