EURO ZONE IN SHAMBLES: EUR/USD PLUMMETS AS TENSIONS RISE AND TRUMP THREATENS TRADE WAR
The Eurozone economy is on the brink of collapse as investors continue to sell the EUR/USD pair amid escalating tensions between Russia and Ukraine, coupled with US President Trump's threat to impose tariffs on Eurozone exports. The war in Ukraine has already taken a significant toll on the Eurozone economy, causing gas and oil supply disruptions that weakened the economy during its early stages. With the risk of an escalation looming large, investors are on high alert for any new developments in the conflict, which could lead to huge price movements in the EUR/USD pair.
The euro has been under intense pressure over the past few days, with experts predicting it could reach parity with the US dollar. The latest catalyst for the decline was the release of Eurozone PMI figures, which revealed a sharp economic slowdown. The composite PMI, combining the manufacturing and services sectors, eased from 50.0 to 48.1, indicating a significant downturn in business activity. Meanwhile, the manufacturing sector fell further into recession, with the PMI dropping from 46.0 to 45.2, while business activity in the services sector also eased, with the PMI falling from 51.6 to 49.2.
The European Central Bank (ECB) is under pressure to cut interest rates in December, following the release of poor economic data from Germany. The country's GDP expanded by just 0.1%, down from the estimated 0.2%. As the largest economy in the Eurozone bloc, Germany's performance has a significant impact on the ECB's policy outlook. With the bloc facing a sharp economic slowdown, investors are bracing themselves for more rate cuts.
TECHNICAL ANALYSIS INDICATES BEARISH SHIFT IN SENTIMENT
The technical analysis of the EUR/USD pair suggests a strong bearish shift in sentiment. The 4-hour chart shows a solid downtrend, with the price consistently staying below the 22-SMA, respecting it as resistance. Twice, bulls have attempted to take control by pushing the price above the 22-SMA, but were swiftly reversed by bears. In the most recent pullback, the price rose to retest the 1.0600 critical level, breaking above the SMA but failing to break above 1.0600. Bears took back control, breaking below the 30-SMA and making a new low in the downtrend.
The RSI shows strong bearish momentum, indicating that the pair still has downside potential. A break below 1.0400 will make a lower low and continue the downtrend. The bias will only change when the price breaks above the SMA and makes higher highs and lows. The daily chart shows a clearer picture of the bearish shift in sentiment for EUR/USD, with the price making a double top before collapsing in a steep downtrend.
SUPPORT AND RESISTANCE LEVELS TO WATCH
The most crucial support level to watch is 1.0400, which has been breached several times in recent trading sessions. A break below this level will confirm the continuation of the downtrend. On the other hand, a reversal would require the price to break above all major resistance levels, including 1.0802 and 1.0600.
EUR/USD FUNDAMENTAL ANALYSIS INDICATES ECONOMIC SLOWDOWN
The fundamental analysis of the EUR/USD pair suggests that the economic slowdown in the Eurozone is a major contributor to the decline in the euro's value. The war between Russia and Ukraine has weakened the economy, causing gas and oil supply disruptions and putting pressure on the European Central Bank to implement another rate cut in December.
The recent data release revealed that business activity in the Eurozone sunk to new lows, indicating a sharp economic slowdown. The composite PMI eased from 50.0 to 48.1, while the manufacturing sector fell further into recession, with the PMI dropping from 46.0 to 45.2. Business activity in the services sector also eased, with the PMI falling from 51.6 to 49.2.
CONCLUSION
The EUR/USD pair is facing significant pressure due to escalating tensions between Russia and Ukraine, coupled with US President Trump's threat to impose tariffs on Eurozone exports. The war has already weakened the economy, causing gas and oil supply disruptions that will continue to put pressure on the European Central Bank to implement another rate cut in December.
Market participants are bracing themselves for more economic data releases, which could provide clues on the December ECB meeting. If the data shows weak economic performance, the euro might reach parity with the dollar. The technical analysis indicates a strong bearish shift in sentiment, with the RSI showing strong bearish momentum and the price consistently staying below major support levels.
Investors are advised to keep a close eye on any new developments in the conflict, as well as upcoming economic data releases that could impact the ECB's policy decisions. A break below 1.0400 will confirm the continuation of the downtrend, while a reversal would require the price to break above all major resistance levels.
FINAL THOUGHTS
The EUR/USD pair is in a precarious position, with investors on edge due to escalating tensions and US President Trump's threat to impose tariffs on Eurozone exports. The economic slowdown in the Eurozone, coupled with gas and oil supply disruptions, has put significant pressure on the European Central Bank to implement another rate cut in December.
Market participants are advised to keep a close eye on any new developments in the conflict, as well as upcoming economic data releases that could impact the ECB's policy decisions. With the risk of an escalation looming large, investors should be prepared for huge price movements in the EUR/USD pair.