EUR/USD: Dollar bolstered by safe haven status, energy riches and economic momentum

EUR/USD must be one of the most well-behaved FX pairs in the world right now, sitting comfortably in a long-running downtrend, refusing to stray too far from the current trajectory no matter what the world is throwing at it.

EUR/USD downtrend remains strong

The daily chart speaks for itself, setting lower high after lower high with corrective rallies in between, largely reflecting the deterioration in the macroeconomic outlook relative to the United States in recent months. Lacking domestic energy supply, and with one war ongoing to the east and another about to erupt a little further south, it’s hard to get excited about euro right now. In contrast, the US dollar is not only outperforming on the economic front, but also energy rich and a notable safe haven. Check. Mate.

Having failed to sustain a topside break following the US consumer price inflation report last week, EUR/USD was hammered back into the downtrend on the escalation of the conflict between Israel and Hamas, reinforcing the view it remains a sell-on-rallies play.

Right now, those contemplating initiating short EUR/USD positions may want to place protective stops above downtrend resistance, currently located around 1.0580. It has found buyers on dips between 1.0480 over the past fortnight, making that the first logical target for potential shorts. 1.0450, the low hit in early October, and 1.0360 are the next downside levels to watch.

Alternatively, a clean break of the downtrend may open the door for a possible bounce back towards 1.0635, the highs struck after the US inflation report.

EUR/USD to remain headline-driven near-term

Like other risk assets, headlines relating to the Israel-Hamas conflict will continue to drive the price action in EUR/USD near-term with other information coming in a distant second in terms of relevance, including the latest German ZEW survey and US retail sales which will top the data calendar on Tuesday.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.