EUR/USD is currently trading with a slight negative bias, with the downside being supported. The recent weakness in the US Dollar is due to September Fed rate cut bets, which has put the USD bulls on the defensive and provided some support for the Euro. The technical setup also favors bearish traders, indicating a possible continuation of losses in the near term.
During the Asian session on Wednesday, the EUR/USD pair moved lower, staying below the mid-1.0700s. While political uncertainty in France is weighing on the Euro, the weaker US Retail Sales data has driven expectations for a Fed rate cut in September, potentially benefiting the EUR/USD pair. The USD is near its weekly low, further supporting the Euro.
The breakdown below the 1.0800-1.0790 confluence of the 100-day and 200-day SMAs has triggered bearish sentiment among traders. The daily oscillators are also signaling further downside potential, with room for more losses before entering oversold territory. This suggests that the path of least resistance for the pair is downwards.
Traders may look for a clear break below the 1.0700 level before considering further short positions. A breach below this key support could lead to a drop towards the 1.0650-1.0640 zone, or even the YTD low from April. Continued selling pressure could extend the recent downtrend witnessed over the past few weeks, with the next major target being around 1.0600.
In case of an upward movement, the pair may face resistance near the 1.0800 level, which has now turned into a key resistance area. A decisive break above this level could trigger a short-covering rally, pushing the EUR/USD pair towards the 1.0865-1.0870 zone before targeting the 1.0900 round figure. This scenario would require substantial buying pressure to reverse the current downward trend.
