EUR/USD Forecast: Bulls give up, 1.0700 at sight

January 5, 2024 12:57 PM +07:00

Eur Usd Forecast Bulls Give up 1 0700 at Sight Pipscollector

EUR/USD Current Price: 1.0805

  • Business activity in the Euro Zone contracted sharply in August.
  • US Dollar loses strength as government bond yields retreat from weekly highs.
  • EUR/USD gains bearish traction and aims to extend its slide sub-1.0800. - The EUR/USD pair trades at its lowest since mid-June as the Euro got hit by dismal local data. S&P Global released the preliminary estimates of the August PMIs, which painted a gloomier-than-anticipated picture.

Euro Zone facing new challenges

According to S&P, business activity in the Euro Zone contracted “at an accelerating pace” in the month, with falling output in manufacturing and services. The Manufacturing PMI printed at 43.7, slightly better than anticipated, while the services index unexpectedly sunk into contraction territory, down to 48.3 against the 50.3 expected. The Composite PMI resulted in 47.0, its lowest in over two years.

German figures were equally discouraging, as business activity suffered the steepest decline for more than three years in August, according to the report. The manufacturing index came in at 39.1, while the Services PMI fell to 44.7, a 39-month low. More worrisome, the document noted an increase in inflationary pressures driven by accelerated cost and price increases in the service sector.

S&P Global will release the United States (US) indexes after Wall Street’s opening, and generally speaking, are expected to offer a better picture of local business activity. The country will also publish July New Home Sales, while the EU will unveil the preliminary estimate of August Consumer Confidence.

Market movements from the US

Meanwhile, the US Dollar is mostly weak against other rivals, as government bond yields eased sharply from Monday’s peaks. The 10-year Treasury note currently yields 4.27%, down 5 basis points (bps). At the same time, Asian and European indexes hold on to modest intraday gains, shrugging off the poor performance of Wall Street on Tuesday.

EUR/USD short-term technical outlook

The EUR/USD pair is sharply down for a second consecutive day and about to pierce the 1.0800 threshold. Technical readings in the daily chart support a continued decline, as technical indicators turned firmly lower within negative levels while still above oversold readings. At the same time, a bearish 20 Simple Moving Average (SMA) is about to cross below the 100 SMA, both at around 1.0930. Finally, the 200 SMA provides support at 1.0795, with a break below it further encouraging sellers.

The near-term picture is also bearish. EUR/USD met sellers around its 20 SMA, which gains downward traction below the longer ones. Technical indicators, in the meantime, head firmly south within negative levels without signs of bearish exhaustion and with room to extend their slides.

Support levels:  1.0790 1.0740 1.0705

Resistance levels: 1.0840 1.0885 1.0930  

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