EUR/USD Bearish Bias Stronger Amid Downward Channel!

The EUR/USD pair is trading with a strong bearish at 1.1955, violating the support area of 1.1956 level. On the lower side, the EUR/USD...

Arslan Butt•Friday, February 5, 2021•3 min read

The EUR/USD currency pair closed at 1.19610, after placing a high of 1.20425, and a low of 1.19573. The EUR/USD pair extended its losses on Thursday, dropping under 1,200 – which is its lowest level since December 1 – on the back of the broad-based strength of the US dollar and the prevailing risk-off market sentiment. The US Dollar was strong across the board, amid the strong job figures and the delay in Biden’s proposed 1.9 trillion dollar coronavirus aid package. On a 10-year note, the rising US Treasury yields also played an important role in raising the price of the US dollar on Thursday.

The US Dollar has hit its highest level in two months, as the brightening outlook in terms of the US economy pushes bond yields higher. The greenback has gained most against the single currency Euro, on the back of the US outperforming the Europeans in respect of vaccine rollouts and the extent of lockdowns. The US dollar was also strong against the British Pound, which was under pressure ahead of the Bank of England’s monetary policy committee meeting.

Meanwhile, the US Stock markets were higher on Thursday, with Dow Jones Futures up by 29 points or 0.1%, and S&P 500 Futures and NASDAQ Futures also high on the day. However, the rising stock market prices failed to reverse the momentum of the EUR/USD pair’s downfall on Thursday. The European Central Bank released its monthly Bulletin on Thursday, which provided updates on economic and monetary developments. According to the Bulletin, the unemployment rate in the Eurozone declined further in November 2020, pushed by an increase in the number of workers covered by job retention schemes. The Bulletin mentioned that short-term labor market indicators had shown continued improvement, but they were still signaling contractionary developments.

The manufacturing sector in the Eurozone has continued to hold up well, while the services sector is being curbed as the new round of lockdown measures takes its toll on the economy.

The growth in trade in the Euro area remained moderate in the last months of 2020, thanks to the rebound in the third quarter after lockdown measures were lifted. The ECB explained that the economic recovery in this area should be supported by favorable financing conditions, an expansionary fiscal stance and a recovery in demand, as containment measures are lifted, and uncertainty fades away.

On the data front, at 15:00 GMT, the Eurozone Retail Sales for December came in, indicating a drop to 2.0%, against the expected 2.4%, which weighed on the Euro, adding further to the losses in the EUR/USD pair. From the US side, at 18:30 GMT, the Unemployment Claims from the US for the last week were released, showing a decline to 779K, against the estimated 828K, supporting the US dollar and adding to the losses in the EUR/USD pair.

The Prelim Nonfarm Productivity for the quarter dropped to -4.8%, against the estimated -2.9%, boosting the US dollar and adding to the EUR/USD pair’s losses. The Prelim Unit Labor Cost for the quarter rose to 6.8%, against the estimated 4.1%, supporting the US dollar, and dragging the EUR/USD prices further down. At 20:00 GMT, the Factory Orders for December came in, showing a rise to 1.1%, against the estimated 0.7%, which supported the US dollar and increased the downside pressure on the EUR/USD pair.

Daily Technical Levels

Support Resistance

1.2008 1.2055

1.1981 1.2077

1.1960 1.2103

Pivot Point: 1.2029

The EUR/USD pair is trading with a strong bearish bias at 1.1955, violating the support area of 1.1956. On the lower side, the EUR/USD may find its next support at 1.1919 and 1.1880. On the higher side, the resistance remains at the 1.2011 level. Let’s consider selling positions below the 1.1999 level today. Good luck!

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.