EUR/USD Forecast: Additional losses toward 1.1730 likely after correction

  • EUR/USD broke below its trading range on Thursday.
  • EUR/USD seems to have turned oversold in the near term. 
  • Upbeat data, rising US T-bond yields support USD.

After starting the day in a calm manner, the EUR/USD pair came under strong bearish pressure in the early American session and dropped to its lowest level since August 27 at 1.1751 before going into a consolidation phase. At the time of press, the pair was down 0.5% on a daily basis at 1.1760.

The renewed USD strength on the back of robust US data in the second half of the day weighed heavily on EUR/USD. The data published by the US Census Bureau revealed that Retail Sales in August increased by 0.7%, beating the market expectation for a decrease of 0.8% by a wide margin. Additionally, the Philadelphia Fed Manufacturing Index jumped to 30.7 in September from 19.4 in August. Although the weekly Initial Jobless Claims edged higher to 332,000 from 312,000, the US Dollar Index gained traction and reached a 20-day high of 92.96.

Moreover, the more-than-2% increase witnessed in the benchmark 10-year US Treasury bond yield helped the USD continue to gather strength against its rivals.

On Friday, the Consumer Price Index (CPI) data from the eurozone, which is expected to remain steady at 3% on a yearly basis in August, will be looked upon for fresh impetus. On the other hand, the University of Michigan will release the preliminary Consumer Sentiment Index data for September.

EUR/USD short-term technical outlook

On the four-hour chart, the Relative Strength Index (RSI) indicator dropped to 30, suggesting that EUR/USD could stage a technical correction before the next leg down. The last time the RSI fell into the oversold area on that chart on September 13, the pair gained more than 50 pips. Nevertheless, the technical outlook is likely to remain bearish unless the pair makes a daily close above 1.1790, where the 200-period SMA is located. 

Support levels: 1.1750 1.1730 1.1700

Resistance levels: 1.1790 1.1820 1.1850  

View Live Chart for the EUR/USD

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