EUR/USD analysis: retest of yearly low likely on a break below 1.1280
|EUR/USD Current Price: 1.1304
- EU latest data suggested a steepening economic slowdown in the Union.
- Treasury yields' curve fueled concerns of n US recession.
The EUR/USD pair closed the week in the red, following horrid European Markit March PMI that exacerbated concerns of slowing economic growth. The pair that hit 1.1447 mid-week on the back of a dovish surprise coming from the US Federal Reserve, fell to 1.1272 on Friday, to close the week around the 1.1300 figure. According to Markit, the manufacturing sector is in contraction territory, a German's manufacturing index fell to 44.7 a 79-month low, while the services one printed 54.9 the lowest in two months. For the whole Union, the Manufacturing PMI resulted at 47.7, a 71-month low, while for the services area, the index resulted at 51.3, its lowest in 2-month. US PMI came in below the market's expectations, but at least held into expansion territory. Fears sent investors into US government debt, which resulted in long-term yields collapsing, with the 3-month yield above the 10-year one. An inverted yield-curve is usually seen as a sign of an upcoming recession, further fueling concerns.
At the beginning of the week, there are a couple of Fed's speakers scheduled to speak, although seems unlikely they could affect the price of the dollar given that the central bank set its course last week. Germany will release the IFO March survey, with the business climate expected at 98.7 vs. 98.5 in February, while the US will unveil minor regional activity indexes.
Measuring the bullish rally between the yearly low of 1.1175 and the high set this past week at 1.1447, the 61.8% retracement comes at 1.1280, from where the pair bounced, settling below the 50% retracement of the same rally at 1.1310, now the immediate resistance. Technical readings in the daily chart, support a bearish continuation, as the pair broke this Friday below the 20 and 100 DMA, with the shortest gaining downward strength. The 200 DMA maintains a strong downward slope at around 1.1480, while technical indicators in this timeframe have entered negative ground with strong bearish slopes. Shorter term, and according to the 4 hours chart, the risk is also skewed to the downside, with the pair having broken below all of its moving averages, meeting sellers around the 100 SMA, while technical indicators barely pared their declines near oversold readings.
Support levels: 1.1280 1.1230 1.1190
Resistance levels: 1.1310 1.1345 1.1385
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