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EUR/USD Forecast: Under Short-Term Pressure

Valeria Bednarik - Chief Analyst at FXStreet
·2 min read

EUR/USD Current Price: 1.2248

  • Coronavirus-related concerns dented the market’s mood in US trading hours.

  • Manufacturing output remained in expansion territory in December in the Union.

  • EUR/USD under short-term pressure, the corrective decline may continue.

The EUR/USD pair surged to 1.2305 on the broad dollar’s weakness at the weekly opening, as equities soared to record highs in the US. The American dollar changed course during US trading hours as the market’s sentiment soured. Concerns came from the UK as the kingdom is set to announce a national lockdown. Also, doubts arise about vaccines’ effectiveness on a new coronavirus strain coming from South Africa, as it presents substantial changes in the structure of the virus’ spike protein. European indexes got to close in the green, but US indexes trimmed pre-opening gains and turned sharply lower to end the day in the red.

Data wise, Markit published the final readings of its December Manufacturing PMIs. The European ones were downwardly revised, with the German index was confirmed at 58.3 from 58.6 previously, while for the whole Union, the index resulted at 55.2.  US manufacturing output, on the other hand, beat the previous estimate by printing 57.1. This Tuesday, Germany will publish November Retail Sales, while the US will unveil the official December ISM Manufacturing PMI, foreseen at 56.6 from 57.5 in the previous month.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair plummeted from the mentioned high to the current 1.2250 price zone, still holding above last week’s close at 1.2215. The 4-hour chart indicates that the current corrective decline may continue, as the pair has broken below its 20 SMA while still holding above the longer ones, which maintain their bullish slopes. Technical indicators head south with uneven strength within negative levels, favoring a bearish continuation in the near-term.

Support levels: 1.2210 1.2170 1.2125

Resistance levels: 1.2260 1.2310 1.2345  

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