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EUR/USD Forecast: Gaining Bearish Traction Needs To Break Below 1.1020

Valeria Bednarik - Chief Analyst at FXStreet

EUR/USD Current Price: 1.1041

  • Wall Street extended its Monday’s rally, lending support to the greenback.
  • Coronavirus concerns set temporarily aside, outbreak continues to spread.
  • EUR/USD gaining bearish traction needs to break below 1.1020.

The greenback has maintained its positive tone this Tuesday, ending the day with a firmer tone. The EUR/USD pair reached a fresh weekly low of 1.1032, as the American currency was underpinned by rallying equities, still driven higher by the solid US ISM Manufacturing PMI published on Monday. The market put temporarily aside coronavirus-related concerns, although the outbreak continues.

European data failed to impress, as Industrial Producer Prices remained stable monthly basis, and unchanged at -0.7% YoY in December. In the US, the January ISM-NY Business Conditions Index came in at 45.8, better than the previous at 39.1, while December Factory Orders beat expectations by rising 1.8%, improving from -0.7% in November.

Markit will publish the Services PMI and Composite PMI for the EU and the US this Wednesday. Most figures are expected unchanged from preliminary estimates. Also, the US will publish the ISM Non-Manufacturing PMI, seen at 58 in January from 54.9 in December, and the ADP survey on private jobs’ creation, foreseen at 156K vs the previous 202K.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair is trading just above the mentioned daily low, which stands around the 23.6% retracement of the latest daily slump. The recovery seen late last week pared just below the 61.8% retracement of the same decline at around 1.1105, which suggest that the pair may well resume its decline toward fresh lows. In the 4-hour chart, the pair is below all of its moving averages, while technical indicators keep easing but without enough strength and around neutral readings. The risk is skewed to the downside, but the pair would need to break below 1.1020 to increase its bearish potential.

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