EUR/USD Sellers Target New Lows Amid Euro Weakness
Market Overview
The EUR/USD pair faces mounting selling pressure as fundamental and technical factors align against the euro. The U.S. dollar has stabilized in anticipation of key U.S. inflation data, which could shape expectations for Federal Reserve policy adjustments. Meanwhile, the euro remains under pressure amid speculation that the European Central Bank (ECB) may cut rates during its Thursday meeting. Adding to the euro’s weakness, the Japanese yen has strengthened against other major currencies, supported by a better-than-expected Wholesale Price Index, further amplifying downward pressure on the euro.
Technical Analysis
On the two-hour chart, EUR/USD has broken through and retested its ascending trendline, highlighting the dominance of sellers in the market. This bearish breakout has positioned the pair for a potential test of the critical support level at 1.04980. A decisive break below this level could accelerate the downtrend, with subsequent price targets at 1.04868, 1.04727, and 1.04570.
Oscillators Confirmation
Momentum indicators further validate the bearish outlook. The Relative Strength Index (RSI) remains in bearish territory, suggesting sustained selling pressure. The MACD histogram and signal lines both reflect an ongoing downward bias, reinforcing the likelihood of continued price declines. Additionally, the Bollinger Bands are expanding, indicating heightened market volatility driven by stronger selling forces.
The moving averages also signal bearish momentum. Shorter-term averages are sloping downward and remain below their longer-term counterparts, providing further confirmation of the prevailing downtrend.
Alternative Scenario
If buyers manage to break above the critical resistance at 1.05390, the ongoing bearish trend would be invalidated. Such a move could signal a potential shift in the market sentiment, allowing for a recovery and the establishment of a new upward trajectory.
Key Levels
- Resistance Levels: 1.05137, 1.05390
- Support Levels: 1.04980, 1.04868, 1.04727, 1.04570
Key Events to Watch
Market participants are closely monitoring the upcoming U.S. inflation report for November. Economists anticipate a 0.3% monthly increase in both headline and core consumer inflation, compared to the prior month’s 0.2% and 0.3%, respectively. Should these forecasts materialize, concerns may arise that the Federal Reserve could adopt a slower-than-expected pace of rate cuts. Such an outcome would likely bolster the dollar further, exerting additional pressure on EUR/USD.
Simultaneously, Thursday’s ECB meeting holds significant implications for the euro. Expectations of a rate cut could intensify selling pressure, especially if ECB policymakers signal a dovish outlook. These developments could further exacerbate the euro’s challenges against a strengthening dollar.
Conclusion
EUR/USD remains firmly entrenched in a bearish trajectory, with key support at 1.04980 marking the next critical target. A breach below this level could trigger further declines, while resistance at 1.05137 and above may cap any corrective bounces. Market sentiment hinges on upcoming U.S. inflation data and the ECB’s policy decisions, both of which are poised to shape the pair’s direction in the near term.
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