EUR/USD Forecast: Recovering, but only within a downtrend channel, selling opportunity?
|- EUR/USD is ticking up below the 1.1400 level in the wake of a new week.
- Chinese related headlines dominate as the US is on holiday.
- The technical picture is bearish for the pair.
EUR/USD kicks off the new week with a gentle move toward 1.1400, trading within a limited range.
China reported an annualized GDP growth rate of 6.4% in the last quarter of 2018, and 6.6% for the whole year, the lowest in 28 years. However, these figures were priced expected and priced in by markets. The silver lining is that some hope that Beijing will provide economic stimulus to boost the economy, which is suffering from the trade war with the US among other issues. The cautiously optimistic mood, driven by these hopes of stimulus, helps stocks and also supports the common currency.
Another China-related topic has no silver lining. Trade talks with the US have reportedly hit a bump in the road as China denied any issues with Intellectual Property (IP) and forced technology transfer. The will of the second-largest economy to buy goods from the US is already priced in. Talks continue ahead of the March deadline to strike a trade deal.
In the US, the government shutdown continues with more and more reports of unpaid government workers struggling to make ends meet. President Donald Trump offered temporary relief for immigrant "Dreamers" in return for funding for a border wall. His offer was rejected by Democrats. Efforts to end the debacle continue.
More: The Partial US Government Shutdown: Much ado about politics
The pair is still licking its wounds from last week's drops which were due to concerns about slower growth in the euro-zone. Another minor indicator of that slowdown was seen in the fresh Producer Price Index (PPI) report from Germany, which showed a drop of 0.4% in December.
While Germany probably avoided a technical recession, growth has stalled, and other European countries are not doing that great. The German central bank, the Bundesbank, releases its monthly report later on.
The US session will likely be quiet as American markets are closed due to Martin Luther King Day.
EUR/USD Technical Analysis
EUR/USD is trading within a downtrend channel as shown by the thick black lines on the chart. The recent upturn represents a correction within the downtrend. Momentum remains to the downside and the pair trades below the 50 and 200 Simple Moving Averages on the four-hour chart.
Support awaits at 1.1350 which was the low point last week and also a swing low early in the month. The next support line is 1.1310 which was a low point in the first days of the year and had also served in this role beforehand. 1.1270 is a double bottom after holding euro/dollar twice in December. 1.1215 was the lowest level in 2018.
1.1410 was a stubborn resistance line last week and converges with the 200 SMA. 1.1450 provided support before the recent downfall. 1.1485 was a peak in mid-January and worked as support beforehand. 1.1540 and 1.1570 are the next levels to watch.
More: EUR/USD path of least resistance is to the downside, despite the recovery – Confluence Detector
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