EUR/USD Forecast: Bearish, corrective advance not out of the table

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0837

Mixed US data and risk aversion kept the dollar up against a weakened EUR.
German Q4 GDP at 0% added pressure on the shared currency.
EUR/USD extremely oversold but still bearish, 1.0770 at sight.

A batch of mixed US data was not enough to put a halt to EUR/USD slump, as European figures were even worse. The pair fell on Friday to 1.0826, a level that was last seen in April 2017, to close the week a handful of pips above this last. Germany economy was unable to grow in the three months to December according to the preliminary GDP estimate, while the EU Q4 GDP came in at 0.1% as expected, down from 0.3% in the previous quarter. In the US, Industrial Production was down in January by 0.3%, although Retail Sales met the market’s expectations, rising 0.3% in the same month. The preliminary estimate of the February Michigan Consumer Sentiment Index jumped to 100.9, beating the market’s forecast of 99.5.

Sentiment was affected by coronavirus concerns and poor US Retail Sales, although equities bounced ahead of the close, trimming intraday losses and ending mixed. Treasury yields, however, remained under pressure, reflecting the dismal mood. This Monday, US markets will be closed amid President’s Day, while the EU won’t release any relevant report. That said, the virus outbreak and its toll on global growth will continue to dictate majors’ direction.

EUR/USD short-term technical outlook

The EUR/USD pair is oversold, having closed in the red nine out of the last ten days. In the daily chart, technical indicators continue to head south despite being in extreme levels, with the RSI currently at 23. The 20 SMA stands over 200 pips above the current level, heading firmly south. In this scenario, the risk of an upward corrective movement is high, yet there are no signs sellers are willing to give up and will likely add at higher levels. Shorter-term, and according to the 4-hour chart, the risk is skewed to the downside, as technical indicators resumed their declines following a modest corrective movement, while a bearish 20 SMA continues to cap advances, now providing dynamic resistance at around 1.0870.

Support levels: 1.0810 1.0770 1.0725

Resistance levels: 1.0870 1.0910 1.0950

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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