EUR/USD Forecast: Euro to continue to weaken as long as 1.1320 resistance holds

EUR/USD has been struggling to regain its traction after turning south from the two-week top it set at 1.1384 on Tuesday. The dollar's market valuation continues to impact the pair's action on Friday and the near-term technical outlook suggests that additional losses are likely in case buyers fail to reclaim 1.1320.

The US Dollar Index, which tracks the greenback's performance against a basket of six major currencies, closed the previous two trading days in the positive territory and continues to push higher early Friday, reflecting the currency's renewed strength. The Fed's hawkish policy outlook remains intact with policymakers voicing support for an acceleration of asset taper before the blackout period starts on Saturday.

On the other hand, investors don't see the European Central Bank (ECB) changing its rate outlook, especially with the omicron variant possibly causing a slowdown in the economic activity. 

ECB President Christine Lagarde will deliver a speech entitled 'Financing the Covid recovery with new economic headwinds' later in the session and she is likely to repeat that their forward guidance doesn't point to a rate hike in 2022. October Retail Sales will be featured in the European economic docket but it would be surprising to see a noticeable market reaction. 

Ahead of the weekend, the US Bureau of Labor Statistics will release the November jobs report, which is expected to reveal an increase of 550,000 in Nonfarm Payrolls. Unless the NFP print falls well short of the market consensus, the dollar shouldn't have a difficult time preserving its strength.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart retreated below 50, suggesting that sellers look to retain control of EUR/USD.

At the time of press, the pair was testing 1.1290 (Fibonacci 23.6% retracement of November downtrend). The 50-period SMA aligns as the next support at 1.1280 and additional losses could be witnessed toward 1.1235 (Tuesday low) in case that level turns into resistance. 

The bearish pressure could weaken if bulls reclaim 1.1320 (100-period SMA, 20-perios SMA). 1.1350/60 area (static level, Fibonacci 38.2% retracement) could be seen as the next resistance.