EUR/USD – Bulls Losing Momentum as Dollar Strengthens; Key Support Levels in Focus
EUR/USD remains within its broader upward trajectory established from the April lows, yet recent price action and technical developments suggest emerging risks of a bearish reversal. On Friday, EUR/USD opened the New York session near 1.1685, having retreated from the overnight high at 1.1718 observed on the EBS trading platform. The pair continued lower throughout the session, marking an intraday low at 1.1656, before stabilizing modestly around 1.1660, representing a 0.38% decline for the day.
Fundamentally, EUR/USD’s recent downward move was driven by renewed strength in U.S. Treasury yields and the dollar. Strong U.S. dollar buying interest emerged alongside increasing gains in USD/CNH and declining equity futures and gold prices, collectively bolstering demand for the safe-haven dollar. This ongoing U.S. dollar strength reflects investors’ cautious stance ahead of Federal Reserve Chair Jerome Powell’s highly anticipated comments at the upcoming Jackson Hole Symposium. Should Powell’s comments lean hawkish or signal a reduced likelihood of aggressive rate cuts, this could lead to further bullish momentum for the dollar, exacerbating EUR/USD downside risks.
Technically, the daily chart exhibits early warning signs for EUR/USD bulls. The pair notably pierced and closed near the upper boundary of the daily Ichimoku cloud, highlighting immediate bearish pressure. Additionally, the recent bearish price action has brought EUR/USD close to testing the 10-day moving average (DMA), currently located around 1.1656, a critical near-term dynamic support. A sustained daily close below this moving average and cloud-top support would significantly enhance the bearish technical scenario.
Momentum indicators on daily charts signal growing concerns. The daily Relative Strength Index (RSI) has turned downward sharply, dropping below its recent upward trend and approaching the neutral 50-line. This declining RSI indicates fading bullish momentum in the near term and raises the risk of continued downward pressure.
However, from a broader, monthly perspective, EUR/USD still maintains constructive technical positioning. Monthly RSI continues to trend higher, remaining above neutral territory, and suggesting that the longer-term bullish structure remains intact. Moreover, the ongoing consolidation phase since April’s lows suggests underlying demand still exists, offering bulls some strategic comfort.
Immediate technical support for EUR/USD lies firmly at the 10-DMA around 1.1656. A breach of this support would expose deeper downside levels, specifically towards the lower boundary of the daily Ichimoku cloud near 1.1600. Further bearish acceleration below this area would bring critical psychological and structural support around 1.1500 into focus.
On the upside, initial resistance is clearly defined at the recent overnight peak near 1.1718. Bulls must successfully reclaim and close above this level to mitigate short-term bearish pressure and target subsequent resistance around July’s high near 1.1750–1.1775.
Given the current technical backdrop, traders should approach EUR/USD with caution. Bearish risks appear elevated in the immediate term, particularly if market conditions continue to favor the dollar ahead of Jackson Hole. Traders should closely monitor the critical support around 1.1656 and 1.1600. Breakdowns here could shift short-term sentiment decisively bearish, prompting deeper corrective moves.