EUR/USD looks to post worst weekly close in more than two years below 1.10

The EUR/USD pair came under strong selling pressure toward the London fix and dropped below the 1.10 handle, likely triggering additional short positions and keeping the bearish outlook intact. As of writing, the pair was trading at its lowest level since May 2017 at 1.0968, losing 0.8% on a daily basis.

Shared currency ends August on a dismal note

Earlier today, the data published by Eurostat showed that the core Consumer Price Index in the eurozone stayed unchanged at 0.9% in August and fell short of the market expectation of 1% to weigh on the shared currency. Moreover, European Central Bank's (ECB) rate-setting committee member Olli Rehn said that the current situation in the euro area called for an effective policy package in September. 

Later in the day, the US Bureau of Economic Analysis, which yesterday reported that the economy expanded by 2% in the second quarter as expected, announced that the core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred gauge of inflation, stayed unchanged at 1.6% on a yearly basis to match analysts' estimates.

Although the University of Michigan's Consumer Sentiment Index edged lower to 89.8 in its final reading for August from 92.1 in the previous estimate, the Greenback didn't have a tough time preserving its strength. As of writing, the US Dollar Index (DXY) is at its highest level in more than two years above near the 99 mark, 

There won't be any macroeconomic data releases from the US on Monday due to Labor Day holiday. On the other hand, the IHS Markit will publish the final Manufacturing PMI for Italy, France, Germany, and the eurozone.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

The EUR/USD pair is heading into the weekly close at fresh multi-year lows, at a level previously seen on May 2017. The weekly chart shows that the decline is set to continue, as technical indicators continue heading south within negative levels, while the pair is developing below all of its moving averages. The 20 SMA has been acting as a dynamic resistance since mid-July at around 1.1200, offering a modest downward slope below the larger ones, also skewing the risk to the downside.  

In the daily chart, technical indicators head firmly lower within negative levels, approaching oversold readings but still with room to extend their declines, as the price develops below bearish moving averages, after a failed attempt to advance above the 20 DMA at the beginning of the week.

With the pair unable to regain the 1.1000 figure, there’s a good chance that the pressure will persist next week. A break below 10.960/80, would expose the 1.0820 region, where it has the next relevant mid-term support. At this point, resistances are located at 1.1050, followed by the 1.1100 figure. A recovery above this last could see the pair extending its advance up to 1.1160 in corrective mode.