EUR/USD Forecast: More losses likely while under 1.0960
- A solid USD performance keeps EUR/USD under pressure.
- Upbeat data from the US and risk aversion boost the DXY to four-week highs.
- The EUR/USD pair remains under pressure, with the next support level at 1.0900.
The EUR/USD broke below key support levels on the back of a solid US dollar performance, falling to 1.0919, the lowest level since July 7. The pair trimmed losses later but remains under pressure, despite oversold readings.
Late on Tuesday, Fitch Ratings downgraded the US sovereign rating from AAA to AA+, with the outlook on "watch negative". The announcement triggered risk aversion and initially weighed on the US Dollar, boosting EUR/USD to levels above 1.1000. However, later in Europe, the pair resumed the downside on the back of a stronger US dollar, breaking below 1.0960.
The US Dollar Index climbed to the highest level in four weeks, above 102.50, after the release of another upbeat labor market report. Private employment increased by 324K, according to ADP, surpassing the market consensus of 189K. More US employment data is due on Thursday with jobless claims and the Unit Labor Cost. The strong US dollar is driving price action, and the next economic number will be critical. Also, risk aversion is supporting the Dollar.
On Thursday, Germany will report its trade balance data, the final service PMIs are due, and Eurostat will release the June Producer Price Index (PPI), expected to show the annual rate falling from -1.5% to -3.1%. Also important for the Euro will be the decision of the Bank of England.
EUR/USD short-term technical outlook
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The EUR/USD broke below an upward trendline and accelerated its decline to the 1.0920 zone, matching the 55- and 100-day Simple Moving Average (SMA). It then rebounded but so far has been unable to reclaim the 1.0960 area. The daily chart shows a clear bearish bias that will be reinforced with a break below 1.0920.
On the 4-hour chart, technical indicators have a clear bearish bias, and no signs of consolidation or a sustained correction are spotted. The negative momentum could drive the pair towards the 1.0900 zone, with the next target at 1.0865.
The Euro needs to rise and hold above 1.0960 to alleviate the bearish pressure. Above that level comes the 1.1005 area and then 1.1050. There are many relevant resistance levels before the downtrend line that stands at 1.1075; above that level, the negative outlook would be negated.
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.
