EUR/USD Forecast: Euro could extend downtrend if 1.0840 support fails

EUR/USD clings to small recovery gains following a two-day slide.
Sellers could take action in case 1.0840 support fails.
Markets will pay close attention to US high-tier data releases.

Eren Sengezer FXStreet

After having closed in negative territory on Wednesday, EUR/USD stayed under bearish pressure during the Asian trading hours on Thursday and touched its weakest level in three weeks at 1.0833. The pair holds steady above 1.0850 following a technical correction in the European session.

The risk-averse market atmosphere allowed the US Dollar (USD) to continue to find demand as a safe haven. Additionally, the benchmark 10-year US Treasury bond yield climbed above 3.9% for the first time in four months, providing an additional boost to the currency.

Early Thursday, data from Germany showed that Factory Orders rose 6.4% on a monthly basis. With this reading surpassing the market expectation for an increase of 1.5% by a wide margin, the Euro managed to find a foothold.

In the second half of the day, ADP Employment Change data for June, weekly Initial Jobless Claims and JOLTS Job Openings for May will be featured in the US economic docket. Finally, the ISM will publish the June Services PMI survey.

It will not be easy for investors to navigate through all these data releases. However, the USD could lose strength in case figures point to loosening labor market conditions. A big increase in Jobless Claims, a sharp decline in JOLTS Job Openings toward 9 million or a reading near 45 in the Employment Index of the ISM survey could cause markets to reassess the probability of the Federal Reserve raising rates at least two more times this year.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and the 20-period Simple Moving Average (SMA) continues to stretch lower, reflecting the bearish bias.

On the downside, 1.0840 (Fibonacci 50% retracement of the latest uptrend) aligns as first support before 1.0820 (200-period SMA) and 1.0800 (psychological level, Fibonacci 61.8% retracement).

EUR/USD is likely to face first resistance at 1.0870 (Fibonacci 38.2% retracement) ahead of 1.0900 (50-period SMA, 100-period SMA) and 1.0930 (Fibonacci 23.6% retracement).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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