EUR/USD Forecast: US Dollar back in fashion as fears strike

EUR/USD Current Price: 1.0242

• ECB officials providing mixed hints ahead of the upcoming central bank’s meeting.
• US yields remained stable around Friday’s closing levels, but stocks fell.
• EUR/USD has turned bearish in the near term and could accelerate the decline once below 1.0190.

The EUR/USD pair edged lower on Monday, heading into the US close pressuring its daily low. The pair bottomed at 1.0222, with an intraday attempt to recover ground meeting sellers at 1.0262. Global equities edged lower at the beginning of the week as speculative interest focused on news coming from China. The country reported a spike in Coivd contagions and two deaths in Beijing, raising concerns of potential lockdowns that could translate into fresh supply-chain issues, one of the main reasons global inflation soared earlier in the year.

The macroeconomic calendar had little to offer, although figures were mixed. Germany published the October Producer Price Index (PPI), which unexpectedly contracted by 4.2% MoM. The annual figure was up by 34.5%, well below the previous 45.8%. The US, on the other hand, published the October Chicago Fed National Activity Index,  which printed at -0.05 from 0.17 in the previous month.

Also, European Central Bank (ECB) Executive Board member Philp Lane was on the wires and said that any recession in the Union would be mild and short-lived. He also noted that the ECB would hike rates again in December, progressing towards the levels needed. Government Council member Robert Holzmann said if the current situation persists, they will go for a 75 bps hike in December. Finally, ECB policymaker Mario Centeno noted that many conditions exist for rate increases to be less than 75 basis points in December.

On Tuesday, the EU will release the September Current Account and the preliminary estimate of November Consumer Confidence, the latter foreseen at -26 from -27.6 in the previous month. The US calendar has nothing relevant to offer.

EUR/USD short-term technical outlook

The daily chart for EUR/USD shows that price holds near its daily low while retreating further from a mildly bearish 200 SMA currently at around 1.0400, further supporting another leg lower. Technical indicators, in the meantime, head firmly lower, although correcting overbought conditions and still well above their midlines. Finally, the 20 SMA keeps advancing below the current level and above a flat 100 SMA. The immediate support level and the one to break to confirm a bearish extension is 1.0193, the 38.2% retracement of the 0.9729/1.0480 daily rally.

The 4-hour chart shows that the 20 SMA gains bearish traction above the current level, reflecting increasing selling interest. The longer moving averages maintain their bullish slopes below the current level, with the 100 SMA converging with the 50% retracement of the aforementioned rally. Technical indicators, in the meantime, hold within negative levels, about to resume their slides after a brief consolidative stage.

Support levels: 1.0190 1.0145 1.0105

Resistance levels: 1.0260 1.0305 1.0350

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