The EURUSD pair is likely to keep sliding in the short term, with political and fiscal risks in the eurozone powering the downtrend.
France's budget deficit and the ever-growing cost of servicing sovereign debt are now giving investors serious sleepless nights. With political forces unable to find common ground, a premium is creeping back into prices, causing capital to flee to safer US assets.
The euro's troubles don't stop there. Spanish Prime Minister Pedro Sánchez's decision to call early elections has thrown another log on the fire, amplifying uncertainty over the region's commitment to strict fiscal discipline.
Sure, headline inflation in the eurozone has climbed to 3.8%, but this is purely an energy story. The core reading is still sitting right at the 2.5% target. Meanwhile, soaring fuel costs are cutting into business margins and hammering household purchasing power in Europe.
Across the Atlantic, however, the US dollar continues to dominate. Even if the Federal Reserve (Fed) pushes its next interest rate hike to December due to lackluster jobs data, the 10‑year Treasury yield remains near multi-year highs of 5.34%, keeping the greenback in hot demand.
From a technical perspective, a sturdy bearish channel has formed on the 4-hour (H4) and daily EURUSD charts. With the dollar flexing its muscles and Europe's fiscal troubles piling up, going short on the pair seems to be the most prudent move right now.
The ultimate recommendation is to sell EURUSD. Place Take Profit at 1.1167. Set Stop Loss at 1.1290. This setup puts 600 points of potential gains on the table.
Always size the position so that your potential loss (protected by a Stop Loss order) is no more than 1% of your account balance. If you can't open a position that meets such a risk criterion, it's safer to skip this trade and wait for a better, lower-risk opportunity.
This content is for informational purposes only and is not intended to be investing advice.
