Facts
- The EUR/USD pair experienced a strong bullish surge, reaching its first resistance level around 1.09, defined by previous price reactions.
- However, the fundamentals of the European economy remain weak, and the ECB has signaled further rate cuts this year.
- According to The Telegraph, Russia’s conditions for a potential peace deal in Ukraine include no physical presence of Western troops as part of a peacekeeping mission in the country.
- Meanwhile, the Bundestag’s agreement on financing a defense program aimed at boosting European economic growth remains uncertain, with a spokesperson for Germany’s Green Party stating that no significant progress has been made in negotiations.
Recommendation
Short position on EUR/USD at market price
- Take profit: 1.08, 1.066
- Stop loss: 1.096
Opinion
The EUR/USD rally has been fueled by U.S. dollar weakness and expectations of economic recovery in Europe, driven by hundreds of billions of euros in industrial support programs, particularly defense investments. However, the rally stalled at four-month highs, struggling to break above 1.09. Beyond the uncertainty surrounding European defense investments, which is exacerbated by political disagreements in Germany, the peace conditions for Ukraine could also dampen market optimism.
Additionally, the heavily oversold U.S. dollar may regain strength in the coming weeks, adding further pressure on EUR/USD. We recommend a short position on EUR/USD, with an initial target at 1.08 and a stop loss at 1.096, both levels aligned with previous price reactions. In the case of a deeper decline, we suggest considering an additional take profit level at 1.066, defined by the 200-session moving average (EMA200, red line).
Source: xStation5
