EUR/USD Forecast: Euro Slides to 1.1542 — Can Bulls Defend Support?
In the European session EUR/USD took another tumble , sliding under 1.1560 for the second day in a row and hitting a two month low of 1.1542
Quick overview
- EUR/USD has fallen to a two-month low of 1.1542, driven by trade tensions and disappointing German economic data.
- The U.S. dollar is gaining safe-haven appeal as investors move away from the euro amid rising trade risks.
- Germany's economic indicators, including a plummeting ZEW current conditions index and rising inflation, are contributing to the euro's decline.
- Technically, EUR/USD remains under a bearish trendline, with critical support at 1.1521 and potential targets at 1.1460 and 1.1393.
In the European session EUR/USD took another tumble , sliding under 1.1560 for the second day in a row and hitting a two month low of 1.1542. The euro’s weakness is largely being driven by the recent China-U.S. trade hostilities , Germany’s somewhat disappointing economic data , and stubbornly high inflation in Europe. People are also keeping a very close eye on what Fed Chair Jerome Powell has to say in his upcoming speech – could his words be the tipping point in this fragile market environment ?
The tensions in the U.S.- China trade dispute flared up again after they both ended up slapping levies on various goods. Washington went on to say that it was going to slap a 100% tariff on Chinese imports from Nov 1 , meanwhile Beijing retaliated by limiting its rare earth exports – a pretty typical back and forth. And as usual this has spooked investors , who are now getting nervous and are heading out of the euro and into safer assets.
Germany’s economic indicators were not all that great either. Their ZEW survey showed a current conditions index that plummeted to -80.0 – the worst reading since May . And while the expectation index did manage to edge up to 39.3 , it just wasn’t enough to offset the general feeling of unease. But the final nail in the coffin was Germany’s inflation rate which rose 0.2% month on month and 2.4% year on year – pretty much exactly as expected but still a concern for investors. The whole thing has added to the euro’s woes.
Dollar takes on safe-haven appeal & Fed Watch
The U.S. government’s data releases have been pretty much MIA due to the funding crisis , so everyone’s waiting with bated breath for Jerome Powell’s speech in the hope he’ll give them some much-needed guidance . And it looks like the markets expect the Fed to cut interest rates twice in the coming months – but only time will tell if that actually happens.
Against this backdrop the U.S. dollar’s safe-haven appeal is drawing in plenty of investors. And with the eurozone’s problems building and trade risks shooting up , lots of traders are hedging their bets and sticking with USD – which in turn is keeping the EUR/USD pair pinned at multi-week lows.
EUR/USD Technical Setup: Channel, Trend & Entry Bias
Technically speaking – EUR/USD is still stuck beneath a downward-sloping trendline that’s been building since the September highs – and it’s being squeezed into a bearish channel where each new high is lower than the last and new lows are lower than the last. The pair is hanging precariously just above an important level of support at 1.1521 – which has been tested multiple times already this month.
The 100-period simple moving average is hovering just above at 1.1684 – which is still reinforcing the bearish outlook as long as the pair stays below it. If support around 1.1520 does break down then the next targets are 1.1460 and the August swing low around 1.1393. If the pair does manage to get above the trendline resistance level around 1.1620 then it could open up a new path towards 1.1680.
Trade Setup at a Glance:
- Short entry : if it falls below 1.1520
- Target zones : 1.1460 , maybe 1.1393
- Stop-loss : above 1.1620 – to avoid getting caught out by a false reversal
As it stands right now – EUR/USD is still under technical pressure – a textbook case of a bearish channel in action.
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