Dollar Weakens as Geopolitical Tensions and Policy Uncertainty Mount
The US dollar experienced its second consecutive weekly decline, falling to 1.1919 on Friday, as escalating geopolitical tensions and growing uncertainty surrounding US economic policy eroded investor confidence.
The greenback’s struggles come amid a flurry of statements from Washington that have rattled markets. According to reports, the US President threatened new tariffs against nations supplying oil to Cuba and issued a stark warning to Iran regarding potential military action should they refuse to engage in a nuclear agreement. Adding to the volatility, a promise to unveil a new Federal Reserve chair nominee on Friday morning followed sustained calls for current Chair Jerome Powell to adopt a more aggressive interest rate cutting strategy.
Despite these pressures, a preliminary agreement between the White House and Senate Democrats to avert a government shutdown offered a partial reprieve from short-term fiscal concerns. Earlier in the week, the dollar had plummeted to levels not seen in nearly four years after a senior official publicly expressed a lack of concern over its weakening value. This sentiment was later countered by the US Treasury Secretary, who reaffirmed a commitment to a strong dollar policy.
EUR/USD Technical Outlook: Bullish Momentum Persists
Technical analysis suggests the euro is poised to continue its upward trajectory against the dollar. On the four-hour chart, EUR/USD has demonstrated a growth wave toward 1.2080. A sustained breach of this resistance level could signal a continuation of the prevailing uptrend. Currently, the pair is undergoing a corrective phase, moving towards a support level of 1.1875.
This correction scenario is technically supported by the MACD indicator, with both its histogram and signal line positioned above zero, indicating a downward wave. Analysts anticipate that upon completion of this correction, the uptrend will resume, targeting 1.2045 and subsequently 1.2200, with potential interim corrections.
Examining the one-hour chart, the pair is also exhibiting a correction following a test of resistance. A rebound from the 1.1860 support level would reinforce the formation of a new growth wave. The Stochastic oscillator’s signal lines are trending towards level 80, further suggesting the continuation of the upward momentum, with a potential growth target of 1.2045. “
Fundamental Factors Underpinning Euro Strength
In summary, despite a recent corrective pullback, the fundamental environment – characterized by heightened geopolitical risks and policy ambiguity – continues to weigh on the US dollar, simultaneously bolstering the euro’s relative strength. Technically, the correction appears to be nearing completion around key support levels, and indicators on both the H4 and H1 timeframes point to a high probability of the upward trend resuming. The overall bias remains bullish, suggesting a potential test of higher resistance zones.
