EUR/USD Forecast: Looking for a new direction and the downside is more tempting

EUR/USD is leaning lower within the range amid adverse developments.
Draghi's dovish stance and concerns about China weigh.
The technical picture remains mixed as the pair clings to the range.

Yohay Elam FXStreet

EUR/USD is trading in the lower half of the 1.1300 handle, marginally lower. European Central Bank President Mario Draghi said that the balance of risks is moving to the downside, sending the common currency lower. However, the world's most popular currency pair never went too far.

The ECB also formally announced the end of its bond-buying scheme which ran for nearly four years and pledged to reinvest the proceeds from maturing bonds. The Frankfurt-based institution will maintain the 2.6 billion euros balance sheet well beyond the first increase of interest rates, according to the pledge.

See: ECB's QE is dead, long live QE!

Markit's preliminary purchasing managers' indices for France badly disappointed. The Manufacturing PMI fell to 49.7, the services PMI to 49.6. Scores below 50 reflect future contraction. The numbers are worrying.

China remains in the limelight of the global economy, but this time due to economic indicators rather than its trade spat with the US. Growth in industrial output slowed down to 5.4% YoY, and retail sales in the world's second-largest economy decelerated to the lowest levels since 2003. The news weighs on markets and limits any potential gains for the euro.

Italy and the European Commission continue their negotiations over the Italian budget. The sides are reportedly getting closer, but a gap remains. Concerns about a broad French budget deficit have subsided.

The Brexit saga continues with European leaders rejecting a legally binding change in the Irish backstop, and they are willing only to add declarations. The Pound is on the back foot, but it is not affecting the Euro so far.

Later today, the US releases retail sales numbers for November. Consumption is central to the American economy, and the data feed into next week's Fed decision.

See: US Retail Sales Preview: Strong currents ahead of the holiday shopping season

EUR/USD Technical Analysis

EUR USD technical chart December 14 2018

EUR/USD is entrenched in a narrow range. Momentum is going nowhere, and the Relative Strength Index is around 50, fully balanced. The pair is trading slightly below the 50 and 200 Simple Moving Averages on the four-hour chart, a minor bearish sign.

1.1330 was a swing low on Thursday and provides some support. 1.1305 is the bottom of the recent range after supporting EUR/USD twice in past weeks. The November trough of 1.1270 is the next line to watch ahead of the 2018 low of 1.1215.

1.1380 is a minor line of resistance after capping the pair early in December. 1.1400 is already a stronger level of resistance after capping euro/dollar twice. 1.1420 was a swing low early in the month, and 1.1445 held it down more recently.

More: EUR/USD bears are back in play – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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