EUR/USD: Limited Recovery Indicates Strong Bearish Pressure

The EUR/USD currency pair experienced a decline on Tuesday morning, undoing approximately half of Monday's rally, which had seen an increase of 1.3%. This initial surge was driven by President Trump's announcement to delay implementing tariffs, which were originally intended to take effect immediately.

Despite this momentary rally, it appears that any respite for the EUR/USD is fleeting. The pair is struggling to maintain its recovery, and efforts to rebound were limited by a significant resistance level. This resistance is represented by the Fibonacci 23.6% retracement level from the recent decline (1.1214 to 1.0177), specifically at 1.0422. Each attempt to push higher has repeatedly faced obstacles at this barrier.

The overall technical outlook for the EUR/USD remains predominantly bearish, suggesting that the stronger bearish forces are likely to regain full control once the current phase of consolidation concludes. The declining daily cloud, which spans between the levels of 1.0555 and 1.0690, continues to exert downward pressure on the market.

Further adding to the pessimistic sentiment is the formation of a death cross between the 100-day and 200-day moving averages. Additionally, the Relative Strength Index (RSI) is trending downwards and has fallen below the neutral zone, reinforcing the bearish bias.

In the near term, it is expected that the bearish outlook will persist as long as the price remains capped below the Fibonacci barrier at 1.0422.

The fundamental backdrop for the Eurozone is far from encouraging. The economy is facing significant challenges in gaining traction for recovery. Political instability continues to undermine confidence in the Euro, and the prevailing actions of President Trump present a considerable challenge for the Eurozone.

The threat of imposing tariffs on all EU exports to the United States looms large, as Trump seeks to address the trade deficit with the EU. This situation is a pressing concern for the bloc, which is simultaneously trying to strengthen relations with the US while grappling with high energy costs and its role in the ongoing conflict in Ukraine.

In the near future, an extended period of consolidation seems likely, with price movements expected to linger within the current range. Stronger upward moves will likely encounter resistance at the top of the falling daily cloud, before the broader downtrend that began at the 2024 peak of 1.1214 resumes.

Resistance levels are identified at: 1.0422; 1.0478; 1.0534; 1.0555.
Support levels are positioned at: 1.0305; 1.0260; 1.0224; 1.0200.

EURUSD, recovery, bears