EUR/USD Forecast: Bears are likely to target sub-1.10 levels, Eurozone PMIs in focus

The selling pressure around the shared currency picked up the pace on Thursday after a rather uninspiring ECB and dragged the EUR/USD pair to seven-week lows. Having failed to capitalize on its early move beyond the 1.1100 barrier, the pair came under some heavy selling pressure after the ECB President Christine Lagarde, in the post-meeting press conference, said that risks to growth in the Eurozone remained tilted to the downside. This coupled with the fact that Lagarde did not acknowledge some stabilization in the recent economic data also disappointing bullish traders and weighed on the common currency.

Earlier, the ECB left policy rates and the forward guidance unchanged. The ECB reiterated that rates will remain at current or lower levels until inflation outlook robustly converges with the bank's target of near, but below, 2%. The ECB also launched the review of its monetary policy strategy – seeking to redefine its main goal, appropriate tools, and communications approach. Given that the review would be lengthy exercise, the announcement did little to lend any support or ease the bearish pressure surrounding the major.

Apart from this, anxiety over China's coronavirus outbreak continued propped up the US dollar's perceived safe-haven demand against its European counterpart and contributed to the pair's intraday slide to the lowest level since December 2. The pair tumbled to an intraday low level of 1.1036 but managed to settle around 20 pips off lows. The attempted bounce lacked any strong follow-through and the pair remained depressed through the Asian session on Friday. Following a dovish sounding ECB, market participants now look forward to the flash version of January Manufacturing and Services PMIs prints from the Eurozone for some meaningful trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the post-ECB slide already seems to have confirmed a near-term break through the 1.1070-65 confluence support. Hence, some follow-through weakness, possibly towards testing the 1.1015 region, now looks a distinct possibility. The mentioned support comprised of an ascending trendline connecting October 1-November 29 swing lows, 100-day SMA and 50% Fibonacci level of the 1.0879-1.1239 positive move. Any attempted recovery move might now confront some fresh supply, rather remain capped near the said support breakpoint.

On the downside, some follow-through selling below the 1.1015 region might turn the pair vulnerable to break through the key 1.10 psychological mark and head towards testing November monthly swing lows support near the 1.0980 region.