EUR/USD Forecast: Bearish Pressure Mounts Below 1.1700
Original article by: Justin McQueen, IG
The EUR/USD pair, one of the most actively traded currency pairs in the forex market, has been under renewed bearish pressure as it struggles to maintain its hold above the 1.1700 level. Market sentiment around the euro has been increasingly cautious amid growing concerns over economic recovery in the Eurozone, expectations around future U.S. Federal Reserve policy, and technical indicators suggesting further declines. With key fundamental and technical drivers aligning, traders and investors are carefully watching how this major pair will behave in the short to mid-term.
Overview of Recent EUR/USD Movements
The EUR/USD pair fell sharply in recent sessions, breaking below support levels that previously acted as floors in the market. After showing some resilience above 1.1800 in earlier trading weeks, the pair has failed to find sustained buying momentum and recently broke below the critical psychological marker of 1.1700. This shift is largely attributed to the growing divergence in monetary policy expectations between the European Central Bank (ECB) and the U.S. Federal Reserve.
Bearish market sentiment is now increasing, as trading volumes tighten around the lower end of recent trading ranges. Analysts are pointing out that the pair’s inability to regain key territory could open the door to further losses in coming sessions.
Key Factors Driving the Downside Trend in EUR/USD
Several macroeconomic and technical factors are weighing heavily on the currency pair. Some of the most pertinent contributors include:
– Diverging Central Bank Policies
– The Federal Reserve has signaled increased willingness to taper its bond-purchasing program, thanks to more robust economic data from the United States.
– In contrast, the ECB maintains a more cautious stance as core inflation remains subdued across the Eurozone, despite some recent headline inflation spikes.
– This divergence in central bank paths continues to provide support for the dollar while limiting upside potential for the euro.
– Risk-Off Sentiment in Financial Markets
– Broader financial markets have turned risk-averse amid concerns over the Delta variant of COVID-19 and political instability in some regions.
– As investors flee riskier assets, demand for the U.S. dollar as a safe haven has increased.
– The euro, coupled with lackluster economic indicators in countries like Germany and France, is seeing diminished interest from global investors.
– Weak Eurozone Data
– Key economic indicators in the Eurozone have not met expectations in recent weeks, further fueling concerns about the region’s economic resilience.
– Germany’s economic growth has slowed more than projected, contributing to fears about a potential slowdown in the bloc’s largest economy.
– The overall PMI data from the Eurozone revealed a marginal slowdown in business momentum.
Technical Analysis: Chart Patterns Show Further Bearish Potential
From a technical perspective, the outlook for EUR/USD appears bearish as the pair repeatedly fails to build any sustainable support above 1.1700. Analysts are highlighting several important technical patterns that suggest further downside movement may be in store.
– Break Below Key Support Levels
– The pair’s recent breakdown below 1.1700 confirms bearish momentum and reduces the probability of a near-term reversal.
– Former support now acts as resistance, making any bullish retracement attempts difficult unless buying strength recovers significantly.
– Bearish Candlestick Patterns
– The recent daily chart candlesticks show extended upper wicks and strong bearish bodies, indicating increased selling pressure on each attempted rally.
– Momentum indicators such as the Relative Strength Index (RSI) continue to remain below 50, reinforcing the view of bearish dominance.
– Moving Averages and Trendlines
– EUR/USD is currently trading well below its 20-day and 50-day moving averages, a sign of prolonged downward momentum.
– The sustained position below the 200-day moving average further argues that the broader trend may remain bearish for an extended period.
Forecast and
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