EUR/USD Selling Bias Continues – Brace for a Sell Signal!

The EUR/USD pair closed at 1.20349, after placing a high of 1.20500, and a low of 1.20039. On Wednesday, the EUR/USD currency pair extended its losses, dropping for the third consecutive session, to its lowest level since December 1.

The recovering US dollar and the coronavirus jitters in the Eurozone dragged the EUR/USD currency pair to its lowest level in several months on Wednesday. The investors remained anxious about the Eurozone outlook, which ultimately weighed on the local currency.
The National leaders were starting to feel the heat over the EU’s difficulties in the rollout of the coronavirus vaccination programs, which is increasingly seen as overcautious and marred by mistakes, miscalculations and painfully slow to progress. Angela Merkel and Emmanuel Macron felt the need to explicitly defend the EU approach this week, as vaccination numbers continue to lag behind countries such as Israel, the UK and the US. German Chancellor Merkel said that although others were vaccinating faster, the EU’s slower but collective strategy was the right choice. The French president also said that the progress might seem slow compared with countries that had made other arrangements, but he said that, together with Germany, he would defend the strategy adopted by the EU.

However, the single currency Euro has been broadly unappealing lately, with investors becoming more hesitant to buy Euros, amid concerns over the coronavirus outlook in the Eurozone. The EU struggled to secure the promised number of coronavirus vaccine doses, and the uncertainty surrounding the distribution of vaccines seems set to last. As a result, the European economic outlook was negatively affected by coronavirus jitters, and despite the stronger-than-expected Eurozone PMIs, the EUR/USD pair continued to decline on Wednesday.

On the data front, at 12:45 GMT, the French Gov. Budget Balance for December came in at -178.1B, against the previous -176.8B. At 13:15 GMT, the Spanish Services PMI for January was released, indicating a drop to 41.7, against the expected 45.1, which weighed on the Euro and added further to the losses in the EUR/USD pair. At 13:45 GMT, the Italian Services PMI came in, showing a rise to 44.7, against the estimated 39.5, which boosted the Euro. At 13:50 GMT, the French Final Services PMI figures were released. They rose to 47.3, against the projected 46.5, supporting the Euro and capping any further losses in the EUR/USD pair.

At 13:55 GMT, the German Final Services PMI was released, remaining flat, in line with the expectations of 46.7. At 14:00 GMT, the Final Services PMI from the entire Eurozone for January came in, indicating a surge to 45.4, against the projected 45.0, which supported the Euro and capped any further losses in the EUR/USD pair.
At 15:00 GMT, the CPI Flash Estimate figures for the year showed an advance to 0.9%, against the forecast of 0.6%, providing support for the Euro. The Core CPI Flash Estimate for the year also rose to 1.4%, against the predicted 0.9%, boosting the Euro and limiting any additional losses in the EUR/USD pair. The PPI from the whole bloc for December advanced to 0.8%, against the anticipated 0.7%, also bolstering the Euro. In January, the Italian Prelim CPI surged to 0.5%, against the projected 0.2%, which gave the Euro a boost and capped any further downside momentum in the EUR/USD currency pair.

From the US side, at 18:15 GMT, the ADP Non-Farm Employment Change for January indicated a rise to 174K, against the forecasted 48K, supporting the US dollar and adding further to the losses in the EUR/USD pair. At 19:45 GMT, the Final Services PMI for January showed an increase to 58.3, against the forecasted 57.4, which bolstered the US dollar, adding more downside momentum to the EUR/USD pair. At 20:00 GMT, the ISM Services PMI came in, showing a rise to 58.7, against the projected 56.7, supporting the US dollar and dragging the EUR/USD pair further down.

The US dollar has seen a surge in demand over the past week, as investors repurchase the safe-haven currency, dragging it upwards again from its worst levels. The global coronavirus pandemic concerns, due to the emergence of new variants, raised the safe-haven demand and supported the US dollar, which ultimately added a further burden to the EUR/USD pair’s prices on Wednesday.

Daily Technical Levels:
Support             Resistance
1.2005               1.2083
1.1969                1.2125
1.1927                1.2161
Pivot Point:      1.2047

The EUR/USD pair is trading with a bearish bias at 1.2017, violating the support area of 1.2007. On the lower side, the EUR/USD may find its next support at 1.1960 and 1.1930. On the higher side, the resistance remains at the 1.2050 level. Let’s consider selling positions below the 1.2050 level today. Good luck!