EUR/USD Forecast: Trying to lick its wounds after Draghi dealt a deadly blow

The EUR/USD is rising from the abyss after Draghi and US events dragged it lower.
A light calendar as a busy week reaches its end leaves room for trade concerns to simmer.
The technical picture, which never fully recovered, sees bears in control.

Yohay Elam FXStreet

The EUR/USD is trading around 1.1600, up from the lows of 1.1543 seen earlier after a dramatic Thursday. The world's most popular currency pair experienced its biggest fall since Donald Trump was elected President.

The biggest downer was Draghi. While the ECB announced the beginning of the end of QE, the decision was wrapped up with conditions to every move and also a pledge not to raise rates through the Summer of 2019, well over a year from now. In the press conference, Draghi added some additional worries and doubts, sending the Euro tumbling down.

On the other side of the Atlantic, the Fed made its hawkish hike a day earlier, signaling two additional increases this year and providing very optimistic commentary about the economy. However, the US Dollar was unleashed only after US Retail Sales beat expectations with a gain of 0.5% in Control Group on top of an upward revision and alongside other better-than-expected figures.

Markets are still digesting these all-important events, and a light economic calendar enables it. ECB member Ewald Nowotny expressed optimism about reaching the inflation target and provided some modest support to the common currency. The final euro-zone inflation data for May confirmed the 1.9% rise on the headline and 1.1% on the core, as widely expected.

In the US, Industrial Production is published at 13:15 yet markets may move more on the University of Michigan's Consumer Sentiment publication at 14:00 GMT. The figure will likely show ongoing optimism among US shoppers. The inflation expectations component will also be of importance. See how to trade the data with EUR/USD.

EUR/USD Technical Analysis

As the chart shows, the fall on Thursday was quite significant. It sent the RSI back below 50 and signs of upside Momentum were crushed. The pair failed to recapture the lost uptrend support line and plunged spectacularly.

Support awaits at the fresh low of 1.1543, yet a more critical cushion is 1.1510 which is the 2018 low. Further down, 1.1480 played a role back in July 2017.

On the upside, 1.1650 was the May 25th low and also a confluence of quite a few potent levels. Further above, 1.1730 served as support earlier in the week when the pair traded on higher ground. 1.1850 was the peak on Thursday.

All in all, the bias remains bearish.

EUR/USD may recover to 1.1650 or continue crashing all the way to 1.1440 – Confluence Detector

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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