EURUSD, Time frame: Daily, Tools: SMA 35-50EURUSD, Time frame: Daily, Tools: SMA 35-50

Technical analysis – EUR/USD

The EUR/USD pair is trading sideways between a resistance zone near 1.1275 and a support zone near 1.1110. This sideways movement is taking place within a broader downward trend that continues to dominate price action, particularly following the break below previous support levels near 1.1400.

Accordingly, we will focus the technical analysis on the following points:

  1. Price action remains below the 35-day and 50-day moving averages, confirming the bearish nature of the trend, particularly following the bearish crossover, with the 35-day moving average falling below the 50-day moving average.
  2. The RSI momentum indicator is trading in the bearish momentum zone, below the 50 level.
  3. Sideways consolidation phases are generally considered pauses or periods of rest within the preceding trend. Therefore, the current sideways movement, which is taking place within a rectangle pattern, may simply represent a pause in the downward trend. The euro could resume its decline if a break below the 1.1110 support level is confirmed.

Fundamental analysis – EUR/USD

Monetary policy expectations continue to weigh on the euro, given the higher US interest rates, which range between 3.75% and 4.00%, compared with the European Central Bank's rate of 2.50%.

Furthermore, the rise in US inflation in October has reinforced expectations of tighter monetary policy, supporting the US dollar and limiting the pair's recovery prospects.

Will the euro resume its downward trajectory following the current consolidation phase?