EUR/USD Forecast: Bears pressuring for fresh 2021 lows
EUR/USD Current price: 1.1677
- Risk aversion took over financial markets as supply shortages affect economic progress.
- US Federal Reserve Chair Powell will testify before Congress today.
- EUR/USD is technically bearish and could accelerate its decline once below 1.1663.
Market players are on their toes on Tuesday, and the dollar is making the most out of it, up across the FX board. Risk aversion dominates the financial scene, early triggered by power shortages in China, later boosted by a fuel crisis in the UK. The EUR/USD pair trades near a daily low at 1.1671, not far away from its 2021 low at 1.1663.
Power cuts in China have been blamed on rising coal prices leading to short supply. The situation may well extend for a few months threatening economic growth. In the UK, gas stations have been clogged with cars since late last week, amid fears supplies are running low, exacerbating supply chain issues. The government has put the army to deliver gasoline in an attempt to cool down panic buying. The crisis started over a tanker drivers’ shortage.
Meanwhile, European Central Bank President Christine Lagarde commented on inflation. She noted that inflation expectations do not point to risks of prolonged overshooting, adding that the EU still needs an accommodative monetary policy stance. Other ECB policymakers are scheduled to speak throughout the day.
The US has published the preliminary estimate of its August Trade Balance, which posted a deficit of $87.6 billion, while Wholesales Inventories in the same month increased 1.2%, worse than anticipated. After Wall Street’s opening, US Federal Reserve Chair Jerome Powell will testify about the Coronavirus and CARES Act before the US Senate.
EUR/USD short-term technical outlook
The EUR/USD pair is down for a third consecutive day and may accelerate its decline. In the daily chart, the 20 SMA gains bearish strength far above the current level, as technical indicators remain within negative levels, with the RSI heading lower at around 35.
In the near term, and according to the 4-hour chart, the bearish case is firmly in place. The pair is below bearish moving averages, with the 100 SMA about to cross below the 200 SMA. Also, technical indicators remain near oversold readings, without signs of downward exhaustion.
Support levels: 1.1660 1.1620 1.1570
Resistance levels: 1.1720 1.1755 1.1785
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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.
