EUR/USD Rises Amidst Strengthening Risk-on Sentiment

Key Takeaways

• Euro rises as market sentiment leans towards risk-taking
• Risk-on, risk-off trend could persist for next few months
• Policymakers and central bank authorities reassure no banking crisis

Overview

The Euro is up against the U.S. Dollar, buoyed by the news of First Citizens BancShares’ acquisition of Silicon Valley Bank’s deposits and loans, as well as the absence of any new vulnerabilities in the global banking sector.

At 12:00 GMT, the EUR/USD is trading 1.0839, up 0.0040 or +0.37%. On Monday, the Invesco CurrencyShares Euro Trust ETF (FXE) settled at $99.72, up $0.37 or +0.37%.

Market sentiment is leaning towards risk-taking, causing the dollar to weaken. This risk-on, risk-off trend could persist for the next few months.

Concerns over Fragile Banking Sector Could Cast Shadow on Euro’s Modest Gains

As the Euro makes modest gains, concerns about the vulnerable banking industry could limit its upward momentum.

Despite reassurances from policymakers and central bank authorities that there won’t be a banking crisis, there are still some worries.

According to Charles-Henry Monchau, the chief investment officer at Syz Group, investors are reevaluating their belief that interest rate hikes benefit banks by increasing net interest margins. Instead, they are factoring in the possibility that sudden rate increases could harm the weakest sectors of the economy, resulting in banks bearing the brunt of the damage.

Daily EUR/USD Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower.

A trade through 1.0930 will signal a resumption of the uptrend. A move through 1.0517 will change the main trend to down.

The minor trend is up. A trade through 1.0713 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is 1.0930 to 1.0713. The EUR/USD is currently testing its retracement zone at 1.0821 – 1.0847.

The primary upside target and potential resistance is a long-term 50% level at 1.0943. The nearest support is a short-term 50% level at 1.0775.

Daily EUR/USD Technical Forecast

Trader reaction to the minor 50% level at 1.0821 is likely to determine the direction of the EUR/USD on Tuesday.

Bullish Scenario

A sustained move over 1.0821 will indicate the presence of buyers. Taking out 1.0847 will indicate the buying is getting stronger. This could create the momentum needed to challenge the minor top at 1.0930.

Bearish Scenario

A sustained move under 1.0821 will signal the presence of sellers. This could trigger a break into 1.0775, followed by the support cluster at 1.0723 – 1.0713.