EUR/USD Forecast: Bearish breakout on the cards
|EUR/USD Current Price: 1.0665
- This week, the United States Federal Reserve and other major central banks will make announcements.
- European Central Bank policymakers making cautious comments after the dovish hike.
- EUR/USD retains its bearish stance has room to slide towards the 1.0540/60 area.
The EUR/USD pair trades with modest gains on Monday, hovering around 1.0660 ahead of Wall Street’s opening. The US Dollar eases despite the market mood tends to sour, as Asian and European indexes got hit by the poor performance of the tech sector, a result of tepid earnings reports from big names from the sector.
Meanwhile, the Euro found support on comments from the European Central Bank (ECB) Vice President Luis de Guindos, who said that “the worst of underlying inflation has gone.” However, De Guindos added that rising energy prices add to the uncertainty over the effect of hikes on economic activity. ECB’s Slovakian policymaker Peter Kazimir was also on the wires and noted that “hopefully” rate hikes are done, although he could not rule out more action. Finally, he said that the end of the tightening cycle will open the debate on how to adjust the central bank bond-buying programs.
The macroeconomic calendar has nothing relevant today, but the week will be packed with central banks’ announcements. The United States (US) Federal Reserve (Fed) will unveil its decision on Wednesday, while the Bank of England (BoE) and the Bank of Japan (BoJ) will follow. Also, the Euro Zone and Canada will publish inflation updates.
EUR/USD short-term technical outlook
The EUR/USD pair posted a multi-month low of 1.0631 last week and holds nearby without signs of a potential bottom. In the daily chart, the pair develops below all its moving averages, with the 20 Simple Moving Average (SMA) maintaining its bearish slope below the longer ones. At the same time, the Momentum indicator heads firmly south within negative levels, while the Relative Strength Index (RSI) indicator consolidates around 35, skewing the risk to the downside.
For the near term, and according to the 4-hour chart, chances are of a bearish extension. Technical indicators lack directional strength but hold within negative levels. Meanwhile, EUR/USD consolidates below a bearish 20 SMA, which gains downward traction below the longer ones, which also head south. A break through the aforementioned monthly low should open the door for another leg lower, aiming for a test of the 1.0540/60 price zone.
Support levels: 1.0630 1.0590 1.0545
Resistance levels: 1.0685 1.0720 1.0770
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