EUR/USD Forecast: Further falls due amid downtrend channel, weak data, trade troubles


  • EUR/USD has been under pressure amid trade uncertainty and weak data. 
  • Euro-zone inflation, US GDP, and trade stand out in the last week of November.
  • Late November's daily chart is pointing to the downside.
  • The FX Poll is showing a moderately bearish tendency.

This week in EUR/USD: Slowdown, trade, and the Fed

Is a euro-zone recession around the corner? While final German Gross Domestic Product figures have confirmed that the nation escaped a downturn in the third quarter, more recent statistics paint a darker picture. Markit's flash Purchasing Managers' Indexes for November have shown a slowdown in the services sector. While manufacturing is contracting at a more moderate pace, it has been dragging down both the German and the euro-zone economies. 

The data has weighed on EUR/USD and capped any attempts to recover. Christine Lagarde, the new President of the European Central Bank, has been unable to boost the common currency. In her first policy speech, her call for euro-zone governments to do more paled in comparison to her predecessor.

Without clear calls from Lagarde and lacking an outright recession, Germany may continue with its tight fiscal policy. And if the continent's locomotive fails to ignite, the bank may step in with more bond-buying – sending the euro lower.

For broader markets, US-Sino relations have dominated the agenda. Headlines jumped choppily from optimism to pessimism, with the latter taking hold amid growing rows between the world's largest economies. The safe-haven US Dollar has been gaining ground. The administration is set to slap additional tariffs on China on December 15, and markets are becoming more anxious as the days pass.

Congress passed a bill supporting pro-Democracy protesters in Hong Kong, angering Beijing, which summoned the American ambassador to express its dissatisfaction with the development. At the time of writing, President Donald Trump has still not signed the bill into law. 

The Federal Reserve is watching trade developments. Lael Brainard, Governor at the Fed and permanent voter, said that the high level of uncertainty is weighing on investment. However, John Williams, her colleague at the New York Fed, has reaffirmed the bank's position that the US economy is in "a good place."

The meeting minutes from the recent Federal Open Market Committee (FOMC) have shown broad support for the latest rate cut – the third in a row – but also that members backed a long pause. The Fed's wait-and-see mode contrasts the ECB's ongoing bond-buying. Trump summoned Jerome Powell, Chairman of the Federal Reserve, to an unscheduled meeting and then complained about the strong dollar. The greenback initially dipped, but then recovered. 

US figures have been mixed, with an upbeat Philly Fed Manufacturing Index and a minor beat in Existing Home Sales. The upcoming week already features top-tier data. 

Euro-zone events: German IFO, flash inflation figures

Is the German economy recovering, or is it headed to a recession? Data from IFO – the nation's No. 1 thinktank – may provide some clues. The Business Climate index, Current Assessment, and Expectations figures are all expected to advance in November's report, albeit from low levels.

Economists expect Inflation figures from the old continent's powerhouse to have remained unchanged at 0.9% annually in the early release for this month.

The data from Germany shape expectations for the Consumer Price Index data for the whole continent, due out on Friday. Traders will likely focus on Core CPI, which has bumped up to 1.1% in October and is now set to slide back down to 1%. Headline inflation is forecast to remain unchanged at 0.7% – far from the ECB's 2% target. 

Unemployment statistics – from both Germany and the euro-zone – have come out below expectations of late. Labor markets have generally been thriving in recent years, and a turnaround may cause sleepless nights for policymakers. 

In addition to economic indicators, comments from ECB members may move the common currency as well as trade relations with the US. 

Here are the events lined up in the euro-zone on the forex calendar:

Euro-zone macro economic forex November 25 29 2019
 

US events: GDP, durables, and trade

Trade headlines top the agenda for American investors also on Thanksgiving week. Markets will be closed on Thursday, and liquidity will likely remain subdued on the following day – Black Friday. 

If Trump and his counterpart Xi Jinping announce a deal, the dollar may drop, allowing EUR/USD to rise. An accord that includes removing past levies would be preferred. However, if talks break down and the US advances toward slapping new duties, the greenback may continue rising amid safe-haven flows, sending eurodollar down. 

Developments around Trump's impeachment hearings have yet to affect markets, but the pressure is mounting. The president has been further implicated in the Ukraine scandal. Senior confidants such as Gordon Sondland, ambassador to the EU, and millionaire Trump donor, spilled the beans on an attempted quid-pro-quo deal with the Ukranian president. 

The US calendar kicks off in earnest on Tuesday, with three housing figures and the Conference Board's Consumer Confidence Index for November. While consumers remain optimistic, the gauge is off the high levels above 130 points. Confidence is correlated with retail sales, and shoppers' mood ahead of Christmas will test the resilience of the economy. 

The calendar is packed on Wednesday, with an update on third-quarter Gross Domestic Product (GDP) standing out. The second reading is projected to confirm the 1.9% annualized growth initially published. That growth level would outperform other developed economies but reflects moderate, if not mediocre expansion.

Durable Goods Orders for October provide more up-to-date data for the world's largest economy. Investment has been dragging the economy lower, and investors expect no significant improvement in the first report for the fourth quarter. The nondefense ex-air gauge – the "core of the core" – is set to have the most significant impact on markets.

The Fed's preferred inflation gauge is also released at the same time. Core Personal Consumption Expenditure (Core PCE) carries expectations of remaining below 2% – the bank's target – once again. 

Here are the scheduled events in the US:

US macro economic forex November 25 29 2019

EUR/USD Technical Analysis 

EUR/USD is trading within a downtrend channel on the daily chart, after breaking below uptrend support earlier in the month. These bearish developments are joined by downside momentum. The currency pair has failed in its attempts to recapture the 100-day Simple Moving Average and trades well below the 200-day SMA. However, the 50-day SMA provides a cushion.

Support awaits euro/dollar at 1.1045, which is where the 50-day SMA hits the price. It is closely followed by 1.1025, which was a swing low in the summer. Next, we find November's low of 1.0990, followed by 1.0925, a double-bottom from September. The 2019 low of 1.0879 is the next level to watch.

Resistance awaits at 1.11, the mid-November peak, which nearly converges with the 100-day SMA. It is followed by robust resistance at 1.1180 – a double-top that also is also the confluence with the 200-day SMA. 1.1250, 1.1290, and 1.1325 tower above. 

EUR USD Technical Analysis November 25 29 2019

EUR/USD Sentiment

Markets have yet to price in America's outperforming of Europe fully. Moreover, the US and China may wait until closer to December 15 to clinch an accord. Overall, there is more room to the downside than to the upside. 

The FXStreet Poll is showing that forecasters are undecided about the short term but see moderate falls afterward. Targets are little changed in comparison to the previous week. While some experts predict wild swings, most have come to accept the low-volatility environment.

EUR USD experts FX Poll November 25 29 2019

Related Forecasts

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. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD rises to two-day high ahead of Aussie CPI

AUD/USD rises to two-day high ahead of Aussie CPI

The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.

AUD/USD News

EUR/USD now refocuses on the 200-day SMA

EUR/USD now refocuses on the 200-day SMA

EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.

EUR/USD News

Gold price cautious despite weaker US Dollar and falling US yields

Gold price cautious despite weaker US Dollar and falling US yields

Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.

Gold News

Ethereum continues hinting at rally following reduced long liquidations

Ethereum continues hinting at rally following reduced long liquidations

Ethereum has continued showing signs of a potential rally on Tuesday as most coins in the crypto market are also posting gains. This comes amid speculation of a potential decline following FTX ETH sales and normalizing ETH risk reversals.

Read more

Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade

Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade

An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday. 

Read more

Majors

Cryptocurrencies

Signatures