EUR/USD Extends Four-Day Decline as Dollar Strengthens

Summary:

EUR/USD remains under pressure near 1.1520 as Fed tightening expectations outweigh improving Eurozone trade data. Wednesday’s Fed decision and guidance will determine whether the decline extends or gives way to a correction.

Sell EURUSD

End Time

CLOSED

1.15400

ENTRY

1.13500

TGT

1.16500

1.14770 +0.00148 +0.13%

412

Points

Profit

1.13500

TGT

1.14988

CLOSING

1.15400

ENTRY

1.16500

The Euro remains under pressure against the US Dollar, with EUR/USD trading near 1.1520 after extending its decline for a fourth consecutive session. The Greenback continues to command the stronger side of the pair as markets prepare for what could be the Federal Reserve’s first interest rate increase in three years.

Fresh Eurozone data offered little support to the single currency. Germany’s ZEW Economic Sentiment Index edged up to 34.7 in September from 34.2, falling short of the 37.0 expected by markets. The assessment of current conditions improved more substantially to -47.1 from -61.1, beating expectations, although the reading remains deeply negative.

The figures suggest that confidence in Germany’s recovery is gradually improving, supported by fiscal measures and stronger exports. However, persistently elevated energy prices and broader geopolitical uncertainty continue to cloud the outlook.

Eurozone trade figures were considerably stronger. The region recorded a €14.2 billion trade surplus in July, comfortably exceeding expectations of €3.7 billion and improving from June’s downwardly revised €7.2 billion surplus. Even so, the positive surprise has been insufficient to reverse the Euro’s decline as monetary-policy expectations remain the dominant market driver.

The Dollar continues to benefit from expectations that the Fed will raise rates by 25 basis points on Wednesday. Higher short-term US yields, elevated oil prices and subdued global risk appetite have collectively strengthened demand for the Greenback.

ING’s Francesco Pesole noted that the Dollar has begun responding more decisively to those supportive factors after previously showing a relatively muted reaction. With the Fed decision approaching, however, volatility could temporarily ease as traders become reluctant to establish aggressive positions immediately before the announcement.

The larger question is what the Fed signals beyond Wednesday. If policymakers deliver the expected hike and maintain a hawkish outlook for additional tightening, EUR/USD could remain vulnerable and extend its decline below current monthly lows. A more cautious message from the Fed, however, could encourage profit-taking on long-Dollar positions and provide the Euro with room for a corrective recovery.

Technical Analysis

EUR/USD is beginning to shift more decisively in favor of sellers on the 4-hour chart. The recovery that carried the pair toward the 1.1700 area has lost momentum, with price subsequently carving out lower peaks and extending its retreat toward 1.1538.

The most important development is the move beneath the 1.1565–1.1580 region. This zone had previously provided a base for buyers, but the latest breakdown changes its role into potential resistance. As long as EUR/USD remains below this area, upside attempts are likely to struggle for sustained follow-through.

The immediate decline may not necessarily unfold in a straight line. Price is approaching the 1.1510–1.1530 area, where some buying interest could emerge and produce a temporary recovery. A rebound toward 1.1550–1.1570 would fit the current structure, allowing the pair to retest recently broken support before sellers potentially return.

If that recovery is rejected, attention shifts toward 1.1450–1.1470. This represents the next substantial support area on the chart and could temporarily slow the decline. However, losing that floor would significantly increase the likelihood of a deeper move toward 1.1340–1.1360, which forms the next major demand zone and the primary downside objective.

For buyers to regain meaningful control, EUR/USD would first need to recover above 1.1580 and begin rebuilding above the recent lower highs. Until that happens, rebounds remain vulnerable to selling pressure.

Overall, the chart favors a sell-the-recovery scenario, with a limited bounce potentially preceding another bearish continuation toward 1.1450 and eventually the 1.1350 region.

TRADE RECOMMENDATION

SELL EUR/USD

ENTRY PRICE: 1.1540

STOP LOSS: 1.1650

TAKE PROFIT: 1.1350

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

3006

Win Rate

63.66%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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