EURUSD Analysis: Will the Bearish Trend Resume

Explore EliteForexPartner's comprehensive analysis of the EURUSD currency pair's recent price action and its potential impact on the ongoing bearish trend. Delve into technical and fundamental indicators across various timeframes and gain valuable insights into the future movement of EURUSD.


8/16/20234 min read

Euro and US Flag representing the EURUSD currency pair
Euro and US Flag representing the EURUSD currency pair

The EURUSD currency pair has been a focal point of interest for traders and investors, with its recent price action sparking discussions about the potential for a bearish trend continuation.

In this analysis, we'll delve into the various timeframes and technical indicators to gain insights into the potential future movement of EURUSD.

EURUSD Technical Analysis

EURUSD Monthly Timeframe:

Taking a step back and examining the monthly timeframe, it becomes evident that a downward trend has been established. The price is currently positioned at the top of a swing high, which historically has marked a significant resistance point.

This suggests that selling pressure might intensify, reinforcing the potential for a continuation of the bearish trend.

Monthly chart of EURUSD Price at swing high at a resistance point
Monthly chart of EURUSD Price at swing high at a resistance point

EURUSD Daily Timeframe:

Zooming in on the daily timeframe, a key technical development emerges.

A bullish trendline break has occurred, signaling the presence of selling pressure and a potential shift in market sentiment.

This break suggests that the recent uptrend might be losing steam, allowing bears to take control and steer the price toward the downside.

Chart of EURUSD daily timeframe evidence of selling pressure
Chart of EURUSD daily timeframe evidence of selling pressure

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EURUSD Four-Hour Chart:

On the four-hour chart, an additional confirmation of the bearish sentiment can be observed. The price has broken through a support level, which is now being tested as resistance.

This change in dynamic underscores the market's inclination to push the price lower. Such a scenario often implies that traders are now more interested in selling into rallies rather than buying dips.

EURUSD on the 4h Chart
EURUSD on the 4h Chart

Fundamental Influencers Of the EURUSD

The EUR/USD currency pair is one of the most traded pairs in the Forex market, representing the exchange rate between the Euro (EUR) and the US Dollar (USD). Over the years, the exchange rate of the EUR/USD pair has been influenced by a variety of factors, leading to fluctuations in both directions. Some key factors that have caused the EUR/USD pair to drop over the years include:

1. Diverging Monetary Policies: Differences in monetary policies between the European Central Bank (ECB) and the US Federal Reserve (Fed) can lead to changes in interest rates and policy directions. When the Fed raises interest rates or signals a tighter monetary policy, it can attract capital inflows to the USD, leading to a stronger dollar and a drop in the EUR/USD pair.

2. Economic Performance: Economic indicators such as GDP growth, employment data, inflation rates, and trade balances play a significant role in currency movements. Weak economic performance in the Eurozone compared to the US can lead to a decrease in the EUR/USD pair.

3. Political Uncertainty: Political events, such as elections, referendums, and geopolitical tensions, can impact currency markets. Uncertainty surrounding political developments in the Eurozone has occasionally led to a drop in the Euro.

4. Eurozone Debt Crisis: The Eurozone debt crisis, particularly during the years following the global financial crisis of 2008, resulted in concerns about the financial stability of several Eurozone countries. This uncertainty put downward pressure on the EUR/USD pair.

5. Brexit: The United Kingdom's decision to leave the European Union (Brexit) created uncertainty and volatility in financial markets, including the EUR/USD pair. The prolonged negotiations and uncertainty surrounding the terms of the UK's exit affected the Euro's value.

6. Trade Relations: Trade tensions between major economies can impact currencies. Trade disputes between the US and its trading partners, including the European Union, have occasionally influenced the EUR/USD exchange rate.

7. Market Sentiment and Risk Aversion: Shifts in market sentiment and risk appetite can affect currency movements. During periods of global risk aversion, investors often seek safe-haven assets like the US Dollar, leading to a drop in the EUR/USD pair.

8. Global Economic Events: Events such as the financial crisis of 2008, the European debt crisis, and the COVID-19 pandemic have had significant impacts on financial markets, including the EUR/USD pair.

9. Interest Rate Differentials: Changes in interest rate differentials between the Eurozone and the United States can affect the attractiveness of the currencies for carry trades and investment.

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In conclusion, the analysis of EURUSD across multiple timeframes and technical indicators indicates a potential continuation of the bearish trend. The monthly swing high resistance, daily bullish trendline break indicating selling pressure, and the four-hour support turned resistance provide a comprehensive view of the prevailing market sentiment.

Traders and investors should carefully monitor these developments, along with any potential shifts in global economic events, geopolitical dynamics, and central bank policies. As always, risk management strategies and a clear trading plan are essential for navigating the volatile Forex market effectively. Whether the bearish trend will indeed resume is contingent on a complex interplay of various factors, making it crucial to remain vigilant and adaptive in the ever-changing Forex landscape.