Home Forex News EUR/USD Hits Strong Resistance at 3-Month Highs, Falls

EUR/USD Hits Strong Resistance at 3-Month Highs, Falls

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  • Eurozone economic recovery hopes
  • Declining risk sentiments impact
  • Economic Data Watch

EUR/USD was flat in early Tuesday trading session after a meteoric rise to three-month highs. The spike has come at the backdrop of weakness in the U.S dollar, as well as Eurozone economic recovery hopes across the board.

EUR under Pressure

However, a spike past the $1.1300 level against the dollar appears to have experienced strong resistance resulting in the pair retracing to lows of $1.1290 level. The minor correction is already fuelling concerns that the bullishness experienced in recent sessions is running out of steam.

While the EUR/USD pair has benefited from the greenback’s weakness, the reopening of the Eurozone economy after the COVID-19 pandemic has continued to support the recent rally. While economic releases have fallen short of expectations, the future is looking increasingly bright.

The passing of a €1.35 trillion stimulus plan by the European Central Bank has continued to fuel hope that the Eurozone economy will bounce back. The kind of impact the stimulus plan will have on the economy should become clear in the following weeks with the release of Eurozone data.

Risk Sentiment Impact

Risk sentiments spiraling out of control in the market is one of the tailwinds that could weigh in on the Euro strength. Soaring tensions between Washington and Beijing could lead to further strengthening of the dollar as a safe haven, a development that could lead to a decline in EUR/USD pair.

Similarly, growing concerns about a potential economic recession is another headwind that could influence the EUR/USD direction of trade going forward. The U.S Dollar should remain under pressure as long as the global outlook continues to improve. A weaker dollar should benefit the Euro sending the EUR.USD pair higher.

Looking ahead, the releases of French Trade Balance on Tuesday should weigh in on Euro strength and the Final Employment Change and data on revised GDP data. Trader’s eyes will also be on JOLTS job Openings report in the U.S later in the day, expected to weigh in on dollar strength.

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