EUR/USD Forecast: Bearish pressure remains intact ahead of IFO data
|EUR/USD Current Price: 1.1025
- Shared currency struggled to take advantage of mixed PMI data.
- Risk-off mood allowed USD to outperform its European counterparts.
- EUR/USD could stage a technical correction before stretching lower.
The broad-based USD strength weighed on the EUR/USD pair on Friday and dragged it to its lowest level since December 2nd at 1.1020. The mixed PMI data from the euro area made it difficult for the shared currency to show resilience against the USD, which gathered strength as a safer alternative amid heightened fears over coronavirus becoming a global epidemic.
The data published by IHS Markit revealed that the business activity in the manufacturing sector in the eurozone is expected to contract at a softer pace in January than it did in December. However, the Services PMI in the same period fell to 52.2 from 52.8 to keep the Composite PMI unchanged at 50.9. Meanwhile, European Central Bank President Christine Lagarde, who has adopted a so-called owlish stance, on Friday noted that they have not yet seen a transmission from wages to inflation. On Monday, IFO’s business sentiment data from Germany will be watched closely by investors.
EUR/USD short-term technical outlook
Following Friday’s drop, the RSI indicator on the 4-hour chart fell below the 30 mark to suggest that the pair has become technically oversold and could stage a rebound before extending its losses. However, the 100 SMA and the 200 SMA made a bearish cross on the 4-hour chart, supporting the view that sellers are likely to remain in control of the pair’s action.
Support levels: 1.1020 1.1000 1.0980
Resistance levels: 1.1070 1.1140 1.1180
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