EUR/USD Expected to Maintain Bearish Momentum – Insights from UOB Group
Author: FXStreet (Original Article)
The EUR/USD currency pair is projected to remain under selling pressure in the near-term, according to an analysis shared by the FX Strategy team at the United Overseas Bank (UOB) Group. This shift in momentum reflects recent technical patterns, macroeconomic indicators, and market sentiment, all of which favor the US dollar in the current trading environment.
This article expands upon the original content published by FXStreet and offers a more comprehensive look at the EUR/USD outlook based on UOB’s expert commentary and recent developments in the forex market.
Overview of UOB’s Latest EUR/USD Outlook
According to the FX Strategy team at UOB Group, the EUR/USD pair is likely to sustain its bearish tone, with resistance levels acting strongly on any short-term rallies. The team believes that while minor retracements can occur, the currency pair has returned to a downward trajectory due to both technical indicators and fundamental headwinds.
Key points from UOB’s analysis:
– The EUR/USD pair faces downward pressure primarily due to macroeconomic divergence between the United States and the Eurozone.
– Economic performance in the US, particularly strong labor market data and inflation readings, has led to increased expectations that interest rates will remain elevated for longer.
– In contrast, the Eurozone economy exhibits signs of stagnation and is experiencing difficulty gaining traction, which is putting pressure on the European Central Bank (ECB) to avoid further tightening.
This sentiment indicates that the balance of risks remains tilted to the downside for EUR/USD, unless there is a significant shift in economic fundamentals or central bank policy.
Technical Analysis of EUR/USD
UOB’s near-term technical outlook suggests that the EUR/USD pair has re-entered a bearish phase. This change was signaled after the pair failed to sustain a move above the psychological 1.0900 level and broke through key support areas convincingly.
According to UOB:
– One-day outlook: Further consolidation is possible, but any bounce is likely to be capped below strong resistance zones.
– One-week outlook: The currency pair is expected to trade with a downward bias unless it breaches key resistance levels.
– Resistance levels sit near 1.0890, with more significant resistance approaching 1.0940.
– On the downside, immediate support is seen at 1.0830 and 1.0800. A decisive break below these levels could open the path for further losses toward 1.0750.
Trend indicators also support the bearish view:
– The Relative Strength Index (RSI) has moved away from overbought territory and now indicates building downward momentum.
– Moving average crossovers on the 4-hour and daily charts suggest a shift to a more defensive stance for bulls.
– The pair is trading below its 50-day and 100-day exponential moving averages, which reinforces the short-term bearish pattern.
Fundamental Factors Weighing on the Euro
The euro has weakened broadly against the US dollar and other major currencies due to a confluence of economic and policy factors. These include:
1. Eurozone Economic Weakness
Recent data out of the Eurozone continues to show tepid growth. Industrial production, services output, and consumer confidence remain below historical averages, reflecting a fragile recovery.
– Germany, the region’s largest economy, has posted weaker-than-expected GDP numbers in recent quarters.
– Inflation in the Eurozone is easing, which limits the ECB’s flexibility in raising rates further.
– Manufacturing and services PMIs have not shown sustainable improvements.
2. Divergence in Central Bank Policy
With the European Central Bank (ECB) adopting a cautious approach following its previous rate hikes, the contrast with the US Federal Reserve’s tone has widened.
– The ECB recently signaled a potential pause in rate increases due to softening inflation data.
– The Fed, however, appears more hawkish, suggesting that rates may need to stay elevated longer to meet its inflation
Read more on EUR/USD trading.