EUR/USD Price Analysis: Seems vulnerable near mid-1.0500s amid geopolitical tensions

• EUR/USD retreats from over a one-week high amid reviving demand for the safe-haven USD.
• The technical setup still favours bearish traders and supports prospects for a further decline.
• Any strength beyond 1.0600 is likely to remain capped near the ascending channel barrier.

The EUR/USD pair opens with a modest bearish gap opening on the first day of a new week and snaps a three-day winning streak to the 1.0600 neighbourhood, or over a one-week high touched on Friday. Spot prices remain depressed through the Asian session and currently trade around the 1.0550 area or the daily low.

As investors digest the mixed US monthly jobs report released on Friday, fresh geopolitical tensions lend some support to the safe-haven US Dollar (USD) and act as a headwind for the EUR/USD pair. The USD is further underpinned by the prospects for further policy tightening by the Federal Reserve (Fed), which remains supportive of elevated US Treasury bond yields. Apart from this, speculations that additional rate hikes by the European Central Bank (ECB) may be off the table for now contribute to capping the upside for the major.

From a technical perspective, the recent decline from a 17-month peak touched in June has been along a descending channel and points to a well-established downtrend. Furthermore, the death-cross, with the 50-day Simple Moving Average (SMA) falling below the 200-day SMA  for the first time since July 2021, favours bearish traders. Apart from this, oscillators on the daily chart – though have recovered from lower levels – are still holding in the negative territory and suggest that the path of least resistance for the EUR/USD pair is to the downside.

The 1.0500 psychological mark, however, could act as immediate support and help limit the downside for spot prices. A convincing break below the said handle will reaffirm the bearish outlook and make the EUR/USD pair vulnerable to retesting the YTD low, around the 1.0450-1.0445 region touched last week. The downward trajectory could get extended further towards challenging the ascending channel support, currently pegged around the 1.0400 mark. Some follow-through selling will be seen as a fresh trigger for bearish traders.

On the flip side,  momentum beyond the 1.0600 mark could get extended, though is more likely to remain capped near the top boundary of the aforementioned channel, currently around the 1.0640-1.0645 region. The latter should act as a key pivotal point, which if cleared decisively will suggest that the EUR/USD pair has formed a near-term bottom and shift the bias in favour of bullish traders.

EUR/USD daily chart

Technical levels to watch