EUR/USD analysis: Union's economic slowdown to keep hurting the EUR

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1300

USD gains on rivals' weakness, depending on this week Fed's decision.
EUR/USD poised to test the yearly low at 1.1215 and even break lower.

The common currency gave up Friday, following the release of the December preliminary Markit PMI data, much softer-than-expected and reinforcing the market's idea that economic slowdown has landed in the Union. The EUR/USD pair broke the 1.1300 level, which acted as the base of the previous two weeks´ range, and fell to 1.1269 to finally close the figure around the figure as the dollar retreated in the last trading session of the week. The EUR began weakening Thursday following a dovish ECB, which anticipates economic growth will continue decelerating next year and inflation to remain below 2.0%. The indexes of business activities exacerbated the decline, as for the EU fell to their lowest in over 4 years, with sharp declines in German business and France figures indicating contraction. US preliminary Markit Composite PMI came in at 53.6 vs. the previous 54.7 expanding at the weakest pace since May 2017, with solid growth in manufacturing and slowing services activity. US Retail Sales offset the negative headline, as the core reading rose by the most in a year.

The EU will release November inflation and trade balance data this Monday, with the CPI foreseen down by 0.2% MoM. The US calendar has little to offer, as the most relevant figure scheduled is the NY Empire State Manufacturing Index for December, expected at 21.5 vs. 23.3 previously. China-US trade war and Brexit headlines will lead the way.

The EUR/USD pair finished the week below the daily ascendant trend line coming from the yearly low of 1.1215, technically bearish according to the daily chart, as, after spending the last three weeks hovering around a directionless 20 DMA, it finally moved away from it, with the indicator gaining downward strength around 1.1380. The Momentum indicator turned lower but remains attached to its mid-line, while the RSI heads south around 43, skewing the risk to the downside. Shorter term and according to the 4 hours chart, the technical picture is bearish, as the pair fell below all of its moving averages and with the 20 SMA accelerating south below the larger ones, now around 1.1340, as indicators hold within negative ground with downward slopes, supporting a re-test of the yearly low.

Support levels: 1.1255 1.1210 1.1180

Resistance levels: 1.1340 1.1380 1.1425

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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