EUR/USD Forecast: Oversold, yet potential for further losses
- US Dollar holds firm despite weaker-than-expected ADP report.
- Speculation about rate cuts early next year from the ECB weighs on the Euro and boosts German bonds.
- The EUR/USD remains under pressure within a short-term bearish channel.
The EUR/USD dropped for the sixth consecutive day, hitting levels below 1.0770, the lowest since mid-November. The combination of a weaker Euro and a strong US Dollar continues to exert pressure on the pair. Attention will be on US jobs data.
Expectations of rate cuts in 2024 from the European Central Bank (ECB) before the Federal Reserve (Fed) weighed on the EUR/USD recently. The pair did not react even to weaker-than-expected US data on Wednesday. The German 10-year bond yield dropped more than its US counterpart.
Data from the Eurozone showed that Retail Sales rose 0.1% in September, below the market consensus of 0.2%; on the positive side, August numbers were revised from -0.3% to -0.1%. Germany reported a decline of 3.7% in Factory Orders, contrary to expectations of a flat reading. These numbers contribute to increasing expectations of ECB easing.
In the US, the ADP report showed an increase of 103,000 private jobs in November, below the market consensus of 130,000. The figures briefly weakened the Dollar, but overall, the Greenback remains firm, despite evidence of a tight labor market and easing inflation. Market participants will closely watch new employment data on Thursday with Jobless Claims and Friday with Nonfarm Payrolls. The Consumer Price Index (CPI) and the upcoming FOMC decision will be critical events next week.
EUR/USD short-term technical outlook
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The EUR/USD continues to decline, and the daily chart suggests that the downward momentum could persist. The Relative Strength Index (RSI) is heading south firmly, and Momentum has just crossed the midline, two days after price fell below the 20-day Simple Moving Average (SMA). The pair is testing levels below the 100-day SMA and remains under the 200-day SMA, indicating a bearish outlook.
On the 4-hour chart, EUR/USD remains within a downward channel and is far from the lower boundary, suggesting further downside potential. A break above 1.0800 would alleviate the bearish pressure, but the Euro needs to rise above 1.0825 to negate the short-term bearish bias. A clear break below 1.0760 could find support at 1.0735/40 and could be followed by a temporary rebound.
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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.
