EUR/USD Forecast: 1.1300 support under pressure amid risk aversion

EUR/USD has failed to shake off the bearish pressure on Monday and dropped to its lowest level in two weeks slightly below 1.1300. The souring market mood makes it difficult for the shared currency to find demand while allowing the greenback to gather strength at the start of the week.

Reflecting the risk-averse atmosphere, Germany's DAX 30 is down 2% on the day and the Euro Stoxx 50 Index is losing 2.3%.

Earlier in the day, the data published by IHS Markit showed that the business activity in the eurozone's manufacturing and business sectors expanded at a softer pace than expected in early January. Although German PMI data came in better than analysts' estimates, Bundesbank's monthly report showed that the German economy was expected to contract in the fourth quarter.

The US Dollar Index is up 0.4% on a daily basis at 96.00 with investors gearing up for a dismal opening on Wall Street. The S&P Futures, which were up 0.6% at some point earlier in the day, was last seen losing 0.6%. Last week, the S&P 500 Index fell by 5.7%, recording its largest one-week drop since March 2020. 

Escalating geopolitical tensions amid the Russia-Ukraine conflict, inflation fears and renewed concerns over a global economic slowdown continue to weigh on market sentiment.

Later in the session, IHS Markit will release the January Manufacturing and Services PMI readings for the US but these data are unlikely to have a noticeable impact on risk perception. Hence, EUR/USD remains at the mercy of the dollar's valuation.

EUR/USD Technical Analysis

Unless the pair rises above 1.1300 (psychological level) and manages to hold there, additional losses toward 1.1270 (static level) could be witnessed. Below that level, 1.1250 (static level) aligns as the next support before 1.1230 (static level).

Although the bearish bias stays intact in the near term as the pair trades below the descending trend line, it could make a correction before the next leg lower with the Relative Strength Index (RSI) indicator staying near 30.

On the upside, the 200-period SMA forms a dynamic resistance near 1.1330 before 1.1350 (100-period SMA, the Fibonacci 61.8% retracement of the latest uptrend).