EUR/USD price analysis: euro falls, gold gains as geopolitical risks rise

Key points

• EUR/USD is down almost 300 pips from recent highs (0:29)
• Gold prices rally back to $2,050 after recent dip (1:12)
• Escalating tensions in Middle East and continued US strength could cause EUR/USD crash towards 1.0500 (2:27)
• The US target overnight interest rate was held at 5.25 - 5.50% this week (3:22)
• 52% of EUR/USD traders at IG hold long positions (5:18)

This month, EUR/USD has experienced a significant downturn, shedding nearly 300 pips from its recent peaks to trade near 1.0800. Euro had a strong finish to 2023, but has since given back most of its late gains - now approaching its December lows. In light of the recent downward trend in EUR/USD, 52% of traders at IG currently hold long positions. This divergence between market performance and trader sentiment may reflect a belief in an eventual rebound or a strategic positioning for potential swings.

EUR/USD price action

Gold prices enjoy flight to quality

Recent price action comes as geopolitical tensions in the Middle East escalate further, affecting multiple asset classes in a flight to quality. Gold, often seen as a safe haven during times of uncertainty, has seen a resurgence in its value, with prices rallying back to the $2,050/oz mark following a recent dip. As it relates to currencies, the precious metal typically enjoys an inverse relationship with the strength of the U.S. dollar and can be a strategic asset for traders looking to hedge against currency fluctuations.

Geopolitical events can have profound impacts on currency valuations. The escalating tensions in the Middle East, if they continue, could exert downward pressure on the EUR/USD, potentially driving the pair toward the 1.0500 level. Such events underscore the necessity for traders to monitor global news closely, as international developments can sway market sentiment and lead to rapid changes in currency strength.

Fed holds rates unchanged

Moreover, decisions by central banks play a critical role in shaping the forex landscape. The Federal Open Market Committee (FOMC) agreed to hold the target rate between 5.25% and 5.50%, and downplayed the chance of a rate cut in March. This move led to initial reactions of US dollar strength as markets reconsider the future path of interest rates.

How to trade EUR/USD

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on EUR/USD

Trading forex requires an account with a forex broker like IG. EUR/USD can be found in the "Major" pairs tab. Many traders watch other major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.