Selling EURUSD with 1.16300 in sight

Last week, EURUSD jumped to a local high of 1.18350 amid the two-week ceasefire between the United States and Iran. So far, the pair has managed to fully recover from its early March losses caused by escalating tensions in the Middle East. Yet, the story around this crisis remains mixed. The conflict is far from being resolved, with no new, at least temporary, agreements on the horizon. Nevertheless, the market maintains an optimistic stance, pricing in bright expectations of de-escalation. Under current conditions, this response looks excessive and unrealistic.

Meanwhile, the fundamental landscape keeps favoring the US dollar. And here’s why:

Fed-ECB monetary divergence. The Federal Reserve has kept interest rates higher than the European Central Bank (ECB), making the greenback a more attractive investment option.

Resilient US energy market. Unlike Europe, America is better equipped to handle severe swings in fuel prices and supply disruptions. Consequently, inflation risks and potential shortages in the United States are less acute than in the bloc. This fact provides additional support to the dollar.

Steady American economy. Finally, the US GDP has shown considerable robustness, marked by balanced growth rates and greater macroeconomic stability. As a result, investor confidence in the greenback increases, pushing EURUSD higher.

The technical setup aligns with the fundamentals: the dollar has every reason to strengthen. Last week, the pair failed to break through the 1.18350 resistance level and reversed downward. Momentum indicators, such as the MACD and RSI, are now issuing the first signals of looming bearish sentiment, suggesting there is still room for further decline. The next target could be the 1.16300 support.

The final recommendation:

— Sell EURUSD at the current price, aiming for 1.16300 within a month.

— Place a Stop Loss order at 1.18500, just above resistance, to mitigate risks of the pair’s adverse movements.