EURUSD tests near term support

After reaching the high of 1.1250, last tested in 2022, the EURUSD has been trading steadily lower and currently sits along the 1.0850 support level, formed by the 61.8% Fibonacci retracement level and the previous swing low from early July.

Looking at the technical aspects, the Ichimoku cloud indicates continued bearish pressures, with the top of the channel providing dynamic resistance, highlighting further downside potential for the EURUSD.

The current downtrend on the EURUSD has been driven by the European Central Bank’s (ECB) comments in July that there was no clear bias in favour of hiking or holding rates for the upcoming meeting in September. Coupled with the increasing likelihood of another rate hike to come from the US FOMC in September, as the Fed continues to fight inflation, strength in the DXY has led to the EURUSD trading lower.

While a brief retracement could be likely to retest the upper bound of the channel, look for the EURUSD to maintain within the bearish channel. If the price breaks below the support level of 1.0850, this could signal a confirmation of further downside, with the next key support level at the previous swing low, along the 1.0650 price level.