EUR/USD Forecast: US growth concerns spooked dollar bulls
|- Fears about a US recession put the greenback under pressure but didn’t affect the trend.
- European growth-related data also disappointed, preventing the shared currency from rallying.
- EUR/USD corrective advance rejected by sellers around the critical 1.1000 threshold.
The EUR/USD pair is closing the week with gains around the 1.0960 level, after bottoming at a fresh multi-year low of 1.0878. The greenback was able to appreciate just Monday when disappointing German data and political turmoil fueled the dollar’s momentum. Throughout these last few days, macroeconomic data disappointed from both shores of the Atlantic, as the latest ISM Manufacturing and Non-Manufacturing indexes fell, reviving concerns about the US economic health. The greenback eased, but the EUR/USD pair faltered around the 1.1000 figure, as there are no real reasons for the shared currency to strengthen.
Central Banks and Trade Talks
Trade tensions and political turmoil fueled demand for safe-haven assets in detriment of higher-yielding ones. The US announced it’s planning tariffs on multiple European products, particularly focused on aircraft and agricultural items, as retaliation after the World Trade Organization ruled in favor of the US in the Airbus case. China spent the week on holidays due to the celebration of the Golden Week, with little news from that front. US-China trade talks will resume next week, but there are little hopes they will reach an agreement and put an end to the trade war.
The upcoming week will revolve around central banks. Both, the US Federal Reserve and the European Central Bank will release the Minutes of their latest meetings. Fed’s Chief Powell, in the meantime, is scheduled to participate in different events and give speeches ahead of the Minutes. The market needs to know if the latest dismal economic growth figures will bend his hand or not.
Among other figures, Germany and the US will release the final versions of their respective September inflation figures, while next Friday, the US will release the preliminary October Michigan Consumer Sentiment Index, foreseen at 92.0 against the final August reading of 93.2.
EUR/USD technical outlook
Despite closing with gains, the EUR/USD pair is still bearish in the long run, posting a lower low and a lower high weekly basis and less than 100 pips away from the multi-year low achieved this Monday. When considering the latest daily decline, the pair met sellers for a second consecutive day this Friday around the 61.8% retracement, and now struggles around the 50% retracement of the same slump.
Technical readings in the weekly chart keep favoring declines, as the pair has fallen further below all of its moving averages, which retain their bearish slopes, and as technical indicators turned flat at multi-month lows. Daily basis, a firmly bearish 20 SMA converges with the mentioned Fibonacci resistance at around 1.1000, reinforcing the relevance of the level. The Momentum indicator recovered within negative levels, but the RSI indicator remains directionless around 44, all of which keeps the risk skewed to the downside.
The latest advance seems corrective and could lose further momentum once below 1.0945, the immediate Fibonacci support, eyeing then a retest of the multi-year low at the mentioned 1.0878. Beyond 1.1000, the corrective advance could extend toward the 1.1070/90 price zone, with further gains unlikely, unless the Fed shocks the market by hinting additional rate cuts.
EUR/USD sentiment poll
The FXStreet Forecast Poll says that the market is preferring the greenback over the common currency, as the pair is seen extending its decline in the next three months. Bears dominate the three-time frames under study, with the average prices below the 1.1000 figure, although within familiar ranges, as uncertainty weighs on sentiment. In all cases, the average target is below the current price.
The trend is strong and set to continue according to the Overview chart, with the moving averages heading firmly south at fresh multi-month lows. There’s a limited dispersion toward the upside in the one-month and three-month, but according to the chart, chances of a run beyond 1.1200 are out of the picture for now.
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