EUR/USD Forecast: Only a dead cat bounce as bears are in control, selling opportunity?

EUR/USD is treading water around 1.1330, above the two-week lows but not far off. The recovery we are seeing now can be easily described as a "dead cat bounce": Even a dead cat bounces when it falls on the floor.

The market mood is slightly melancholic after Chinese Premier Li Keipang announced a growth target of between 6% to 6.5%. This is below 6.6% seen in 2018, which in turn, was the lowest in 28 years. He also announced measures to stimulate the economy: lowering taxes and pumping up investments. However, his words about headwinds coming from within and without (namely the trade war with the US) stood out.

Markets are worried about the lower forecasts and unconvinced about the stimulus measures. China's Caixin Services PMI did not help either. It missed with 51.1 points.

On the other hand, the data in the old continent looks slightly better. Both Italian and French figures managed to top 50 points, thus indicating expansion rather than contraction. The euro-zone services PMI came out at 52.8 points in February, a bit above expectations. 

Is the euro-zone rebounding at the beginning of 2019? It is too early to tell, but at least things are not getting worse.

Services PMI is also the focus of the economic calendar in the US. The ISM Non-Manufacturing may slip, albeit remain positive.

See: US Non-Manufacturing Purchasing Managers' Index Preview: Following manufacturing down

Trade talks between China and the US continue and hopes remain high for a deal of sorts. However, a positive outcome is already priced in and markets may be disappointed with the content of such an accord. The fears keep supporting the greenback and are among the reasons for its dominance.

See USD strength: 3 reasons why the Dollar is King and Trump is only the President

The President has other worries: House Democrats opened a broad investigation into Donald Trump's dealings before and after entering the White House. 81 people have received letters asking for documents. The story is in the background for markets but may leap to the forefront if alleged wrongdoing is revealed.

EUR/USD Technical Analysis

EUR/USD is trading below the 50 and 200 Simple Moving Averages on the four-hour chart. In addition, downside Momentum is gaining traction and the pair is still not in oversold territory according to the Relative Strength Index (RSI). 

The bears are in full control.

Support awaits at 1.1310 which was the low point on Monday. Further below, 1.1295 provided some support in mid-February. More importantly, 1.1275 was a swing low around the same period of time. 1.1250 and 1.1235 are below.

Looking up, 1.1335 supported euro/dollar in late February and 1.1350 was a swing high on Monday. 1.1370 capped the pair in mid-February. 1.1390 and 1.1410 follow after they both served as minor resistance lines. 1.1420 is the last line to watch: it was the February high.