EUR/USD Analysis: Struggles to register any meaningful recovery despite oversold conditions

The EUR/USD pair attempted a modest intraday recovery on the last trading day of the week, albeit failed to capitalize on the move and turned lower for the third consecutive session – also marking its ninth day of a negative move in the previous ten. Mounting concerns about weakening economic growth in the Eurozone – in particular the export-driven German economy amid the coronavirus outbreak in China – turned out to be one of the key factors that continued exerting pressure on the shared currency. Market worries were reinforced by the release of preliminary German GDP print on Friday, which showed that the economy stagnated in the fourth quarter of 2019. Separate data showed that the Eurozone GDP growth stood at 0.1% during the three months to December, down from the previous quarter's 0.3%, and marked its weakest level since 2014.

Bearish pressure remains unabated

The pair tumbled to near three-year lows and failed to gain any respite from a subdued US dollar price action. The greenback eased a bit from 4-1/2-month tops on the back of some weakness in the US Treasury bond yields. The USD bulls remained on the defensive following the release of mixed US monthly retail sales data for January. The headline sales matched marked expectations and came in to show a modest 0.3% growth. However, the core reading and Retail Sales Control Group were flat during the reported month as compared to the expected 0.3% growth. Other data showed that the US Industrial Production was down by 0.3% in January, though was largely offset by a larger-than-expected jump in the February Michigan Consumer Sentiment Index and did little to provide any fresh bullish impetus to the buck.

The pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading band through the Asian session on Monday. Given that the US banks will be closed in observance of Presidents' Day, the pair seems more likely to extend its sideways consolidative price action amid absent relevant market moving economic releases from the Eurozone. The market focus now shifts to this week's other important macro data, including the flash Eurozone PMI prints, which should provide a fresh impetus and play a key role in influencing the pair's near-term momentum.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much for the pair and the near-term bias remains tilted in favour of bearish traders. However, extremely oversold conditions warrant some caution before positioning for any further depreciating move. Meanwhile, immediate support is pegged near the 1.0800 round-figure mark and is followed by the lower end of a one-year-old descending trend-channel, currently near the 1.0785-80 region, which might help limit deeper losses, at least for now.

On the flip side, any attempted bounce might now confront some fresh supply near the 1.0870 level and should remain capped near the 1.0900-1.0910 region. That said, a sustained move beyond the mentioned barriers might trigger a short-covering move and lift the pair back towards a strong horizontal support breakpoint, now turned resistance near the 1.0980-85 region.