EUR/USD holds lower ground near 1.0800 ahead of Eurozone GDP
EUR/USD is extending losses to test 1.0800 in the European session. The pair has come under renewed selling pressure, as the US Dollar rebounds amid risk-off markets and sluggish Treasury yields. Eurozone GDP and US data are in focus.
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EUR/USD has extended its slide to a fresh 10-day low near 1.0800 after having closed in negative territory on Monday. The pair's near-term technical outlook suggests that sellers retain control of the action for the time being. In the second half of the day, market participants will keep a close eye on the performance of Wall Street's main indexes.
The risk-averse market environment helped the US Dollar outperform its rivals in the second half of the day. In the absence of high-impact macroeconomic data releases, major equity indexes in the US staged a deep correction on the first trading of the day. Additionally, the benchmark 10-year US Treasury bond yield continued to edge higher above 3.5% and provided an additional boost to the US Dollar.
Early Tuesday, the data from Germany showed that Retail Sales in December declined by 5.3% on a monthly basis. This reading came in mush weaker than the market expectation for an increase of 0.2% and made it difficult for the Euro to stage a rebound.
Later in the session, Eurostat will release the Gross Domestic Product (GDP) growth data for the fourth quarter. Investors expect the annualized expansion to decline to 1.8% from 2.3% in the third quarter. Ahead of the European Central Bank's (ECB) policy announcements, a weaker-than-forecast GDP print could hurt the Euro and vice versa.
In the second half of the day, the Conference Board's January Consumer Confidence Index will be featured in the US economic docket alongside Housing Price Index data for November. Investors are, however, unlikely to take positions based on these data while awaiting the Federal Reserve's policy announcements on Wednesday. Hence, the risk perception could dominate EUR/USD's action in the American session.
It's also worth noting that month-end flows could ramp up the volatility and cause inter-market correlations to weaken toward the end of the European session.
EUR/USD broke below the 100-period Simple Moving Average (SMA) on the four-hour chart for the first time since the beginning of the latest uptrend in early January. Additionally, the Relative Strength Index (RSI) indicator on the same chart declined below 50, confirming the bearish shift.
On the downside, 1.0800 (psychological level) aligns as interim support ahead of 1.0760 (Fibonacci 38.2% retracement) and 1.0730 (200-period SMA).
The 1.0820/30 area, where the 100-period SMA and the Fibonacci 23.6% retracement align, forms critical resistance. Only a four-hour close above that level could discourage sellers and open the door for an extended recover toward 1.0870 (50-period SMA) and 1.0900 (psychological level, static level).
SPECIAL WEEKLY FORECAST
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Despite having touched its highest level since April above 1.0900 at the beginning of the week, EUR/USD has struggled to gather further bullish momentum. The Federal Reserve (Fed) and the European Central Bank's (ECB) policy meetings next week could trigger the next directional move in the pair.