EUR/USD Forecast: Flirting with oversold conditions, but fundamentals continue pointing down

  • EUR/USD continues its downward drift, getting comfortable below 1.1400.
  • Data missed on both sides of the Atlantic, but Europe looks worse.
  • The technical picture points to oversold conditions.

EUR/USD is trading below 1.1400, extending its losses in a gradual downward drift.

The latest hit to the common currency came from German Factory Orders. They dropped by 1.6% in December, significantly worse than expected. The German economy is showing more and more signs of a slowdown.

The central bank, the Bundesbank, said that the economy escaped a recession, but these figures may imply that the continent's powerhouse may have contracted in Q4 2018, adding to concerns of a recession.

The latest substantial data point in the US also fell below expectations. The US ISM Non-Manufacturing PMI came out at 56.7 points, slightly below projections. However, America's services sector is still growing at a satisfactory pace according to this gauge.

All in all, the USD remains the leader in the current global slowdown.

US President Donald Trump delivered his belated State of the Union address to Congress and the nation. The SOTU was a wide-ranging speech in which he confirmed a second summit with North Korean leader Kim Jong-un towards the end of the month. 

UK companies are ramping up preparations for a no-deal Brexit as PM Theresa May prepares to meet European Commission President Jean-Claude Juncker on Thursday. She may be moving towards the European position on the Irish backstop but could lose support at home on the way. The pound suffered, and this may have a collateral adverse effect on the euro.

The calendar is light once again. The US publishes the preliminary Unit Labor Costs and trade balance numbers. Both are second-tier numbers. Fed Chair Jerome Powell speaks after US markets close and may impact markets.

EUR/USD Technical Analysis

EUR USD Technical Analysis February 6 2019

EUR/USD maintains downside momentum, but the Relative Strength Index is flirting with 30, the level that indicates oversold conditions. Will we see a bounce here? It may well be a dead-cat bounce given the fundamentals.

The pair remains below the 50 and 200 Simple Moving Averages. 

Initial support awaits at 1.1380 which is the recent low. A more considerable cushion is at 1.1350 which supported euro/dollar in mid-January. 1.1310 was a double bottom back in December, and 1.1290 is the 2019 trough recorded late in January.

The round number of 1.1400 is a battle line. It supported the pair on Tuesday. 1.1425 served as a temporary cushion earlier this week and is also where the 200 SMA meets the price. 1.1435 was a temporary support line last week, and 1.1450 was a swing high before the fall. Climbing back may be hard with all this resistance. 

More: EUR/USD faces a wall of resistance and targets 1.1295 – Confluence Detector

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD bouncing modestly on disappointing US Consumer Confidence

The shared currency remains pressured by the idea that the ECB will come out with massive stimulus measures in September. US Michigan Consumer Confidence down to 92.1 brakes dollar's gains.


GBP/USD retreats sharply after approaching 1.2200

The GBP/USD pair came under selling pressure after flirting with weekly highs, as a dismal US confidence report brought back risk-off. GBP/USD still up for the week and above the critical 1.2100 level.


USD/JPY: Greenback makes modest progress against Yen, near 106.30

The demand for Yen as a safe-haven currency has been weak in the last three days. The levels to beat for bulls are at the 106.30 and 106.55 resistances.


Four Signs of A Bear Market

I am a believer that the Universe gives you signs. That may sound a bit crazy, but these three charts are three more signs of a bear market. The top chart is the GLD exchange traded fund.

Read more

Gold gives back territory towards a 23.6% retracement

Gold prices were a touch lower by the end of the week, falling -0.68% having travelled between a high of $1,528.00 to a low of $1,503.87, ending the NY session around $1,513. 

Gold News