EUR/USD Price Forecast: Bearish Channel Holds as 1.1730 Caps Rebounds
The EUR/USD pair started the session under a bit of heat, hovering around 1.1680 before briefly hitting a low of 1.1673.
Quick overview
- The EUR/USD pair experienced early volatility, dropping to a low of 1.1673 due to weak German inflation data and a downward revision of the S&P Global Manufacturing PMI.
- Despite the euro's struggles, the US dollar's weakness has limited further losses in the EUR/USD pair as traders await key US economic data releases.
- Weak German economic indicators, including a 0.6% decline in retail sales and a slowdown in inflation, continue to pressure the euro and contribute to a gloomy growth outlook for the Eurozone.
- Technical analysis shows the EUR/USD trading around 1.1690, with cautious near-term bias and key support levels at 1.1659 and 1.1622.
The EUR/USD pair started the session under a bit of heat, hovering around 1.1680 before briefly hitting a low of 1.1673. This early morning wobble has been sparked by some fairly soft inflation data from Germany and a downward revision to December’s S&P Global Manufacturing PMI.
This news confirmed worst fears about the Eurozone’s growth prospects, and that weighed on the euro – at least for a little while. But bear in mind that the selling never really gained any real momentum.
US Dollar Weakness Keeps Gains in EUR/USD to a Minimum
Despite the euro’s obvious struggles, downside momentum in EUR/USD has been well contained, thanks to the US dollar failing to gain any traction of its own. Traders are holding fire ahead of key US data releases, awaiting clarification.
Wednesday’s ADP employment data is due and is expected to show a 45,000 increase in private sector jobs, which should help offset last month’s decline. Then we have the job openings due to ease lower to 7.64 million, while the ISM services PMI is forecast to come in at 52.3, which is still good news, as it shows steady expansion.
If there’s any downside surprise in these US data releases, then that could prevent the dollar from gaining too much strength and keep EUR/USD losses under control.
Weak German Data Is Still Pressing Down on the Euro
The euro can’t catch a break after weak German economic data was released. Retail sales were down 0.6% in November, which was a big miss in terms of expectations – people were expecting a rebound, not a decline. Meanwhile, the eurozone inflation rate has slowed to 2.0% in December from 2.6% previously, and services activity has cooled a bit as well. The S&P services PMI was revised down to 52.4, and all of that just reinforces a pretty gloomy growth outlook for the Eurozone – and of course, that is weighing on the euro.
EUR/USD Technical Analysis
The EUR/USD is trading around 1.1690 on the four-hour chart and is still rising within a channel that has been guiding price action since late December’s peak near 1.1805. The recent candles do show a bit of small bodies and lower wicks around 1.1660 – 1.1680, which does suggest some short-term buying interest – but nothing too convincing.
The descending trend line is still holding back price, and there’s a bit of resistance at 1.1743, so for now the near-term bias in EUR/USD remains pretty cautious. Key support comes in at 1.1659 and then 1.1622. A fib retracement of the previous upswing is also worth noting, as the 38.2% level looks under some pressure. Meanwhile, the RSI is hovering in the low 40s, a sign of weak momentum but with no real oversold conditions.
Trade idea: Sell near 1.1730, target 1.1620, stop above 1.1780
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