EUR/USD Forecast: En route to test the year low

EUR/USD Current price: 1.1712

• News coming from China exacerbate concerns about the global economic comeback.
• The German Producer Price Index jumped to 12% YoY in August.
• EUR/USD bounced modestly from around 1.1700, remains at risk of falling.

The EUR/USD pair battles around the 1.1700 level as the greenback firms up in a risk-averse environment. The dismal mood comes from China, more precisely, from the Evergrande Group, which is China's second-largest property developer by sales. Shares of the company plummeted at the weekly opening by over 10%, as the company faces a possible default. Concerns revolve around Evergrande’s $305 billion of liabilities that may hurt the country’s financial system.

At the same time, market participants turned cautious ahead of the US Federal Reserve’s monetary policy decision next Wednesday. Global stocks are sharply down, with US indexes poised to open dip in the red. Government bond yields are stable, with US Treasury yields ticking marginally lower.

Data-wise, the macroeconomic calendar has nothing relevant to offer on Monday. Germany published the August Producer Price Index, which was up by 1.5% MoM and 12% YoY, spurring mild concerns about inflationary pressures in the EU. The US will release the NAHB Housing Market Index, foreseen at 75 in September.

EUR/USD short-term technical outlook

The EUR/USD pair trades near this year low of 1.1663, oversold in the near term. The risk, however, remains skewed to the downside. In the 4-hour chart, the pair is developing below all of its moving averages, with the 20 SMA heading firmly lower below the longer ones. Technical indicators remain near daily lows, with the Momentum bouncing just modestly. Chances of a corrective advance are limited, while renewed selling pressure below 1.1700 should lead to a retest of the mentioned 2021 low.

Support levels: 1.1700 1.1660 1.1620

Resistance levels: 1.1755 1.1780 1.1820

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