EUR/USD Forecast: 3 reasons for breaking the double-bottom, now challenging downtrend support


  • The EUR/USD collapsed below the 1.1300 double-bottom to a 17-month low.
  • The Fed, Italy, and Brexit are behind the downfall.
  • The technical picture is bearish as the pair is not in oversold territory.

The EUR/USD is finally out of the range, and with a bang. The world's most popular currency pair broke below the double bottom at 1.1300 and reached a low of 1.1240 quite quickly. Cascading stop-loss points may have exacerbated the downfall.

There are three reasons behind the fall:

1) Brexit impasse

Negotiations between Brussels and London have not yielded a solution to the question of the Irish border. Moreover, talks within the British government are in a state of chaos. Supporters of a hard Brexit reject any compromise that PM Theresa May could offer. Pro-Remain politicians such as Justine Greenberg are also having their say, especially after Friday's resignation of Jo Johnson. Johnson was a junior, pro-Remain minister and the brother of former Foreign Secretary Boris Johnson. 

All in all, there are growing concerns that no deal can pass a vote in parliament, regardless of the European Union's position.

2) Italy deadline

The third-largest economy in the euro-zone is due to respond to the European Commission by Tuesday. The EC rejected Italy's budget with its 2.4% deficit and rosy growth forecasts. The Italian government is convening to decide on the matter. 

The ongoing clash is weighing on Italian bonds. Spreads between these securities and the benchmark German bunds is widening and hurting the common currency.

3) USD strength, Fed-related

The US Dollar took a hit on the US Mid-Term elections but then recovered. The Fed left rates unchanged but maintained its hawkish bias, with high expectations for a rate hike in December, the fourth this year.

The US Dollar is gaining ground across the board. US traders are off due to Veterans' Day.

EUR/USD Technical Analysis

EUR USD downfall November 12 2018

The EUR/USD made a convincing breakout below the 1.1300 double-bottom. The Relative Strength Index on the four-hour chart is lower, but above the 30 level that represents oversold conditions. Momentum is to the downside, and the pair is well below the 50 and 200 Simple Moving Averages. 

As the chart shows, the pair has been trading within a downtrend channel in the past few days. The collapse sends it to challenge the bottom of the channel, the downtrend support line. Break or bounce?

The Confluence Detector shows that the next line to watch is 1.1235, just below the recent low. Further down, 1.1210 awaits close by. The next level is 1.1100, last seen in June 2017.

1.1300 now turns into a line of resistance. It is followed by 1.1330 that supported the pair in late October. 1.1360 was a temporary support line in early November, and the round 1.1400 level served as support when the EUR/USD traded on the high ground last week.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

AUD/USD jumps back above 0.6950 as S&P 500 futures test 3,200

Following a bearish opening gap, AUD/USD has recovered ground and trades above 0.6950, tracking the bounce in the S&P 500 futures. The bulls shrug off US-China tensions and the worsening coronavirus situation in the US and Australia. 

AUD/USD News

USD/JPY bears holding their positions below 107 level

Yen remains a safe haven currency of choice as trade wars and the coronavirus play havoc risk apatite. Investors pin hopes on Gilead Sciences reporting that its antiviral drug Remdesivir recorded positive results in clinical trials.

USD/JPY News

Gold: Pierces $1,800 inside short-term bullish flag

Gold prices extend recoveries from $1,798.14, defies two-day losing streak. A seven-day-old bullish technical pattern, sustained trading beyond immediate support favor the buyers. 200-HMA offers additional downside support, bulls will cheer break of $1,811.60.

Gold News

WTI: Depressed above $40 amid output cut talks

WTI defies the late-Friday recovery moves while slipping from $40.80. Saudi Arabia pushes for two million barrels a day output cut, IEA improves on oil demand forecast. Risk-tone remains mildly positive amid virus woes, US-China tension.

Oil News

S&P 500: Bank's earnings in focus, COVID-19 induced insolvency fears simmer away

The S&P 500 will be a key theme on Q2 earnings this week, traders watching the banks for guidance. Wall Street stocks remain in bullish territory, but the S&P 500 is on thin-ice while below the June highs. 

Read more

Forex Majors

Cryptocurrencies

Signatures