Investor confidence in the US dollar has taken a hit, giving the euro a mild lift as optimism builds around ending the US government shutdown. The mood is quietly bullish in the FX space—traders are shifting from caution to tentative risk-on, betting that resolution of Washington’s impasse will ease safe-haven demand for the dollar and lift the broader risk trades. According to EUR/USD coverage, the pair is trading near 1.1570, as the DXY hovers just under 99.7 and investor sentiment edges higher.
Mood at Market Open
Ahead of this week’s session, sentiment gauges suggested a moderate bias: sentiment survey tools such as those on Myfxbook showed mid-range readings for EUR/USD at around 32% bulls, while broader FX sentiment indexes flagged “medium” market sentiment. Traders were broadly positioned for further dollar weakness, but many remained cautious about jumping into euro-longs without a clear catalyst.
Catalyst: What Changed and Why
The key trigger for the shift was renewed optimism that the US Congress might bring the government shutdown to a close. As reported by ForexCrunch: “The euro’s limited momentum … traders shifted focus towards the US fiscal headlines and global risk sentiment.” Social-media chatter and FX forum posts began to reflect increased “risk-on” language: one trader on Twitter quipped that “if the shutdown ends, DXY might need a safety vest.” Meanwhile, currency sentiment posts on Reddit and Twitter flagged growth over fear, as risk assets regained some ground.
Sentiment Shift and Market Reaction
As sentiment improved, the euro gained ground and the dollar eased. That dynamic reflects the psychology of both bulls and bears: the bears of the dollar (or euro-bulls) sensed opportunity. The euro’s RSI near 60 and higher lows on its 4-hour chart signal short-term buying pressure. On the social front, posts citing improved global growth—rather than safe-haven buying—started to dominate threads tagged “EURUSD” and “DXY”. This shift in tone from defensive to opportunistic is meaningful: when fear subsides, the risk-on trades tend to accelerate.
What to Watch Next
With investor confidence improving, the question is whether this shift can persist. Upcoming events — e.g., a resolved funding bill, US economic data, and European Central Bank comments — may tip the next move. Should the dollar continue to weaken, EUR/USD could target the 1.1640 resistance zone. However, traders should remain alert to events that re-ignite safe-haven demand (e.g., geopolitical shocks) which could reverse sentiment quickly.
