EUR/USD Forecast: Vulnerable to a sell-off after wasting its opportunity to rally

• EUR/USD has retreated back below 1.11 as the dollar managed to recover.
• Trade headlines and speculation toward Friday's Non-Farm Payrolls are set to dominate trading.
• Thursday's four-hour chart is showing significant resistance may weigh on the currency pair.

The window of opportunity may have closed – and the path of least resistance may be to the downside after EUR/USD has exposed its weakness. 

The market mood significantly improved on Wednesday amid reports that the US and China are closer to a trade deal despite escalating rhetoric. Stock markets advanced, and the safe-haven US dollar retreated. Fresh comments from Beijing only state that the world's largest economies are in close contact, but refrain from confirming a breakthrough.

Disappointing data from ADP later hit the greenback. America's largest payroll provider reported an increase of only 67,000 private-sector jobs in November – around half the early expectations. Fresh concerns about the US labor market lower expectations for Friday's Non-Farm Payrolls report. Investors had expected a return to gains of around 200,000 jobs, and may now publish downward revisions.

EUR/USD reached the highest levels since early November and hit a high above 1.11, but this stint with the upside was short-lived. ISM's Non-Manufacturing Purchasing Managers' Index (PMI) marginally missed expectations with 53.9 points. After Monday's weak ISM Manufacturing PMI and meager job growth according to ADP, the bar was low for investors to jump back to buying the dollar – and sell euro/dollar back below 1.11. 

The world's most popular currency pair has shown its vulnerability, and it may is now prone to falling in response to the next discouraging trade headline.

Are Sino-American relations improving? 

The US and China have been going in circles in the past few weeks. While some officials claim an accord is close, it seems that Beijing refuses to budge on structural issues such as Intellectual Property, while Washington is unwilling to remove previous tariffs. 

On Monday, President Donald Trump said that he might wait until after the November 2020 Presidential Elections before reaching an agreement. He is back in Washington after the gathering of NATO leaders and may comment on negotiations, potentially via twitter. 

For EUR/USD, an angry tweet from "tariff man" – as Trump described himself – may send it lower. However, if Wednesday's reports are accurate and are followed by something of substance, the greenback may drop, giving EUR/USD another chance to advance. The clock is ticking down toward the December 15 deadline, when the US is set to slap China with new duties. 

In the old continent, German has reported a drop of 0.4% in Factory Orders, adding to the euro's misery. Europe's largest economy had previously reported encouraging signs of a recovery – but these "green shoots" were probably the exception, not the norm. Later, economists expect the updated Gross Domestic Product figures to confirm initial read of slow 0.2% growth in the third quarter, 

Overall, trade headlines and speculation ahead of Friday's Non-Farm Payrolls are set to dominate trading. 

EUR/USD Technical Analysis

Euro/dollar is capped at the uptrend resistance line, which is now around 1.1120, and it is also struggling to hold onto the 200 Simple Moving Average on the four-hour chart. 

Other indicators are upbeat. Momentum remains positive, and the Relative Strength Index (RSI) has dropped below 70 – exiting overbought conditions. 

All in all, the picture is less bullish than earlier this week.

Resistance awaits at 1.11, which held EUR/USD down in late November. It is followed by 1.1120 mentioned earlier. Higher, 1.1165 was a swing high in late October, and 1.1180 – a critical double-top closely follows it.

Support awaits at 1.1065, which supported the currency pair on Wednesday. Next, we find 1.1030, which held it down in early December. November's low of 1.0980 is the next level to watch. 1.0940, 10905, and 1.0879 are next.