Key moments

• The EUR/USD is trading around the 1.0830 mark on Friday.
• In contrast to a struggling euro, the US Dollar Index is up 0.22%, reaching $104.022.
• The pair was affected by the Federal Reserve’s recent interest rate decision, as well as other factors.

EUR/USD Faces Headwinds From Rising Dollar

Friday saw the euro encounter significant downward pressure against the U.S. dollar, experiencing a notable drop that pushed the EUR/USD pair to approximately 1.0832. This movement followed a previous dip below the 1.8200 threshold, as slumps have characterized the EUR/USD in the past several days. The broader context of this fluctuation includes a strengthening U.S. dollar, as evidenced by a 0.22% rise in the Dollar Index, which reached $104.022.

The backdrop to this currency dynamic involves the U.S. Federal Reserve’s stance on interest rates. During a meeting held earlier this week, the Fed did not implement interest rate cuts, a decision that largely coincided with market expectations and contributed to the dollar’s strength. Statements from Federal Reserve officials highlighted the caution the Fed is taking amidst current economic uncertainty.

The EUR/USD pair’s fall from its recent monthly peak has brought the Relative Strength Index (RSI) back from overbought conditions. This retraction points to a possible correction phase. Should the currency pair continue to carve out lower highs and lows, a deeper decline might be anticipated.

The EUR/USD fell below the nine-day Exponential Moving Average (EMA), a breach that serves as a signal of weakening short-term momentum, potentially indicating a shift in the prevailing trend. It should still be noted that despite the recent downturn, the 14-day RSI continues to hold above 50 at the time of writing. Thus, there might still be underlying bullish sentiment despite the recent decline. Countervailing forces are also at play, as there are hopes that potential increases in European government spending could provide support for the euro. While the threat of a trade war exists and could apply downward pressure to the Euro, there is still the potential for the Euro to regain a strong footing.