EUR/USD Forecast: Sellers to take action with a drop below 1.1300
- EUR/USD has found support near 1.1300 early Friday.
- Technical outlook suggests that recovery attempts are likely to remain as corrections.
- Euro could find demand in case safe-haven flows continue to dominate the markets.
EUR/USD has declined toward 1.1300 during the Asian trading hours on Friday but managed to erase its daily losses. The pair continues to trade near the lower end of its weekly range and technical signs suggest that recovery attempts are likely to remain limited in the short term.
On Thursday, the December Meeting Accounts of the European Central Bank (ECB) showed there was a difference of opinion among policymakers regarding the inflation outlook. The publication revealed that the "higher for longer" inflation scenario couldn't be ruled out and some members of the Governing Council wanted the ECB to communicate clearly that it's ready to act if price pressures proved to be more persistent. On a dovish note, concerns were also expressed about any premature scaling back of monetary stimulus and asset purchases.
The shared currency failed to capitalize on the ECB's statement and the greenback preserved its strength in the risk-averse market environment, forcing EUR/USD to close in the negative territory on Thursday.
Safe-haven flows continue to dominate the financial markets in the early European session on Friday but the sharp decline witnessed in the US Treasury bond yields seems to be causing the dollar to stay on the back foot. The euro could outperform its risk-sensitive rivals, such as the AUD and the NZD, ahead of the weekend and stay resilient against the dollar.
There won't be any high-tier data releases in the remainder of the day and investors should remain focused on risk perception.
EUR/USD Technical Analysis
EUR/USD has been posting lower highs on the four-hour chart since the beginning of the week, suggesting that recovery attempts remain technical in nature. Additionally, the 20-period SMA crossed below the 100-period SMA, pointing to a bearish shift in the near term. Finally, the Relative Strength Index (RSI) stays below 50, confirming the view that buyers remain uninterested for the time being.
The 200-period SMA forms the first resistance at 1.1320. In case the pair stays below that level, 1.1300 (psychological level) aligns as first support before 1.1270.
On the upside, the descending trend line acts as a static hurdle at 1.1340 ahead of 1.1350, (00-period SMA and the Fibonacci 61.8% retracement of the latest uptrend) and 1.1380 (Fibonacci 50% retracement).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
