EUR/USD Current Price: 1.0729
- Poor Euro Zone data weighed on the Euro as the US Dollar strengthened on solid employment figures.
- Tensions between the United States and China weighed on the market mood.
- EUR/USD pierced a critical Fibonacci support level, could fall towards 1.0600.
The EUR/USD pair extended its slide to 1.0708 on Monday, its lowest since early January. The US Dollar extended its Friday’s gains on the back of a dismal market mood and as government bond yields reached fresh multi-week highs. The Greenback rallied by the end of the previous week on the back of a solid employment report. The United States created 517K job positions in January, while the Unemployment Rate contracted to 3.4%. The upbeat figures fueled speculation that the US Federal Reserve (Fed) will keep tightening its monetary policy while chances of a rate cut by year-end decreased sharply.
Further fueling the dismal mood were mounting tensions between the United States and China amid the Biden administration’s decision to shoot down a Chinese surveillance balloon over the weekend.
On the data front, Germany published December Factory Orders, which fell by 10.1% YoY, much worse than anticipated. On the other, Euro Zone Retail Sales fell by 2.7% MoM in January and by 2.8% compared to a year earlier. The figures undermined Euro demand during European trading hours.
The macroeconomic calendar for these economies will remain light on Tuesday. Germany will publish December Industrial Production Figures, while the US will unveil its Goods and Services Trade Balance for the same month.
EUR/USD short-term technical outlook
The EUR/USD pair trades a few pips above its intraday low after breaking below a critical Fibonacci level, the 61.8% retracement of the 2022 decline at 1.0745. The risk of further declines has increased with such a break, while technical readings in the daily chart support a continued slide. The pair has extended its slide below a now flat 20 SMA, while technical indicators head south below their midlines for the first time in over a month. The 100 SMA advances, converging with the 200 SMA at around 1.0320.
The 4-hour chart shows that the pair reached oversold conditions, with technical indicators losing their bearish strength but holding near extreme lows. At the same time, the pair is developing below all of its moving averages, with the 200 SMA hovering a handful of pips above the aforementioned Fibonacci resistance level. The 100 SMA has turned flat at around 1.0850, while the 20 SMA gains bearish traction above the latter, all of which skews the risk to the downside.
Support levels: 1.0700 1.0660 1.0615
Resistance levels: 1.0745 1.0790 1.0840
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