EUR/USD Forecast: Euro could take a breather above 1.0700
- The US Dollar benefits from risk aversion and higher yields.
- The Euro lags behind after a downward revision to Eurozone Services PMIs.
- The EUR/USD falls to its lowest level in almost three months, with losses limited above 1.0700.
The EUR/USD decisively broke below 1.0760 and tumbled to as low as 1.0706, marking the lowest level since June. The pair maintains a bearish bias due to a stronger US Dollar and concerns over the Eurozone's economic outlook.
Caution in markets and higher US yields boosted the US Dollar. The US Dollar Index climbed towards 105.00, reaching its highest level in nine months. Meanwhile, the Euro has been negatively affected by downward revisions to the September PMIs. The Eurozone's Service PMI came in at 47.9, below the preliminary reading of 48.3.
On Wednesday, Germany will release Factory Orders data, and the Eurozone will release Retail Sales figures. In the US, the ISM Services PMI is due.
The latest round of US data suggest that Federal Reserve officials can keep the possibility of more rate hikes open. Federal Reserve Governor Christopher Waller stated on Tuesday that data will determine whether further rate hikes are needed, and he would require more information to conclude that the Fed is done raising rates. While the market perceives that the Fed is finished with rate hikes, the divergence in the economic outlook between the US and Eurozone favors keeping the EUR/USD under pressure.
EUR/USD short-term technical outlook
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The EUR/USD broke below 1.0760 and is heading towards 1.0700, confirming the bearish momentum. The daily chart continues to indicate a downward trend, although some consolidation during the Asian session appears likely. While the pair remains below the 200-day Simple Moving Average (SAM), the overall outlook remains bearish.
On the 4-hour chart, the pair is attempting to stabilize around 1.0720. Such an outcome would favor a consolidation phase between 1.0740 and 1.0700 in the next session. Above 1.0740, the next resistance level stands at 1.0780. An approximation to that area in the short term would be viewed as corrective. If the pair falls below 1.0700, the next support level is located at 1.0670.
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Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
