EUR/USD Sellers Face Erosion Ahead of Lagarde Speech

Market Overview

On Monday, November 18, the EUR/USD pair consolidated around the 1.0550 mark, reflecting a tug-of-war between opposing forces. The strength of the U.S. dollar, driven by rising Treasury yields and hawkish Federal Reserve expectations, exerted downward pressure on the euro. Meanwhile, hopes for an economic recovery in the Eurozone and expectations of a cautious European Central Bank (ECB) stance towards interest rates provided some support for the euro.

Technical Analysis

Triangle Pattern and Trend Analysis

The daily chart for EUR/USD showed a triangle pattern, highlighting earlier market indecision before a decisive downside breakout. This pattern defined price fluctuations between specific points (A, B, C, and D) before breaking down, signaling the start of a new bearish trend.

Bearish Cross and Moving Averages Analysis

A key signal on the daily chart was the bearish cross of the weighted moving averages (WMA). The 34-period WMA dropped below the 100-period WMA, indicating a shift from an uptrend to a downtrend, boosting selling momentum. Additionally, prices breached key Fibonacci levels—161.8% and 200.0% at 1.06523 and 1.05854—indicating the persistence of bearish pressure.

Potential Rebound and Retest Levels

Given the current trajectory, a retest of the broken Fibonacci 200% level at 1.05854 is likely. If this level acts as new resistance and prices fail to move beyond it, the bearish trend is expected to continue. If selling momentum persists, the next downside targets lie at Fibonacci extensions of 261.8% (1.04771) and 300% (1.04102). These levels, which also coincide with the previous triangle bottom, are anticipated as significant support zones.

Oscillator Confirmation

The RSI is currently at 29.71, indicating entry into the oversold zone. This signifies substantial selling pressure but also suggests a potential for a short-term upside reaction. Meanwhile, the MACD remains in negative territory, with only a small gap to its signal line, reflecting prevailing downward momentum but with decreasing intensity. The bearish slope of these oscillators suggests continued pressure from sellers, though a brief corrective bounce cannot be ruled out.

Key Technical Levels Overview

Resistance Levels:

• Resistance 1: 1.05854
• Resistance 2: 1.06523
• Resistance 3: 1.07606

Current Price: 1.05409

Support Levels:

• Support 1: 1.04771
• Support 2: 1.04102

Key Events to Watch

This week brings several important economic events that could influence the ongoing downtrend in EUR/USD. On Monday, November 18, all eyes are on ECB President Christine Lagarde’s speech. Any indication of dovish policy or concerns about the economic outlook could weigh further on the euro, reinforcing EUR/USD’s downward movement.

On Tuesday, November 19, Eurozone inflation data will be in the spotlight. Expectations point to a stable annual core CPI at 2.7% and overall CPI at 2.0%. Further declines beyond these forecasts could bolster expectations of additional rate cuts by the ECB, adding more downside pressure on the euro.

The ECB Financial Stability Report, due on Wednesday, November 20, along with another speech from President Lagarde, will also be closely followed. Any acknowledgment of economic instability or focus on vulnerabilities could exacerbate the bearish sentiment for EUR/USD.

In the United States, on Thursday, November 21, initial jobless claims data and the Philadelphia Fed Manufacturing Index will be released. Initial claims are projected to be at 220,000. A lower figure would highlight the resilience of the U.S. labor market, adding further support to the dollar. Despite the expected decline in the Philly Fed Index, the broader narrative remains USD-supportive, keeping the pressure on the EUR/USD pair.

Lastly, the flash PMIs for France, Germany, and the broader Eurozone, to be released on Friday, November 22, are likely to reinforce market sentiment. Forecasts suggest that all PMIs will remain below 50, in contraction territory, highlighting persisting economic weaknesses in the Eurozone and potentially exerting additional downward pressure on the euro.

Conclusion

The EUR/USD pair remains under bearish pressure, with the technical setup favoring further downside. The bearish cross of moving averages and the breach of key Fibonacci levels reinforce the sellers’ control. Key support levels at 1.04771 and 1.04102 are pivotal in determining the extent of the downside move, while resistance at 1.05854 could cap any potential short-term rebound.