This article is a rewritten, expanded version of the original piece titled “EUR/USD Forecast: Bearish Structure Signals Further Downside,” authored by Joel Frank and published on The Tradable. The original content can be viewed at The Tradable website.
EUR/USD Forecast: Prolonged Bearish Momentum Suggests Additional Weakness Ahead
By Joel Frank (Rewritten and expanded)
The EUR/USD pair continues to face significant downward pressure in the forex market, driven by a combination of technical bearish patterns and macroeconomic factors. Despite a brief rebound attempt earlier in the week, the euro remains under sustained selling interest against the U.S. dollar. Several key indicators highlight that the pair is entrenched in a bearish structure, signaling the likelihood of further declines in the near term.
Overview of EUR/USD Current Market Dynamics
The EUR/USD currency pair remains trapped within a bearish trend that has intensified over recent sessions. Multiple attempts by the euro to regain support above key price levels have faltered, suggesting that the U.S. dollar’s dominance is likely to prevail in the short to medium term.
– The euro has dropped significantly from recent highs, falling from the 1.1100 area reached earlier this year to sub-1.0700 levels.
– U.S. economic resilience, particularly in terms of labor market strength and inflation persistence, has bolstered the dollar’s appeal.
– European Central Bank (ECB) monetary policy divergence with the Federal Reserve is adding fuel to the bearish outlook for EUR/USD.
– Technical indicators confirm ongoing downward pressure, supported by lower highs and lower lows on the daily chart.
Technical Analysis: Maintaining a Bearish Structure
The technical picture for EUR/USD strongly suggests that downside momentum remains intact. The pair continues to follow a consistent structure characterized by a descending channel pattern. Each rally attempt faces rejection at lower resistance levels, which reinforces the validity of the bearish technical setup.
Key Technical Factors:
– Downward Sloping Trendlines: Daily charts show that EUR/USD remains below both short-term and long-term moving averages. The 50-day and 100-day simple moving averages (SMAs) are sloping downward, suggesting that the path of least resistance is to the downside.
– Resistance Levels: Strong overhead resistance is evident near the 1.0770 to 1.0800 zone. Every attempt to reclaim this zone has met firm rejection, underscoring strong seller interest.
– Support Levels: Immediate support lies near the 1.0650 mark, followed by another key level around 1.0600. Below this, the pair could target lows from late 2023 around the 1.0500 region.
– RSI Indicator: The Relative Strength Index (RSI) hovers below the neutral 50 level on most timeframes, reinforcing bearish momentum without necessarily showing oversold conditions, which typically suggest a potential rebound.
– MACD Histogram: The Moving Average Convergence Divergence (MACD) indicator continues to move in negative territory with widening histogram bars, reflecting stronger downtrend signals.
Fundamental Drivers Behind the Bearish Bias
While technical factors alone provide a strong case for further EUR/USD weakness, fundamental themes also support this notion. The macroeconomic divergence between the U.S. and Eurozone has grown more pronounced, with the Federal Reserve maintaining higher interest rates for longer than anticipated, while the ECB has hinted at a more accommodative stance moving forward.
U.S. Economic Strength:
– Strong Nonfarm Payroll (NFP) Reports: The U.S. job market continues to exhibit resilience, with better-than-expected NFP numbers suggesting that consumer spending and economic momentum are holding steady.
– Sticky Inflation: Consumer Price Index (CPI) data remains elevated, which has curtailed expectations for near-term Fed rate cuts and supported USD strength.
– Hawkish Federal Reserve Stance: Commentary from Fed officials suggests hesitation to lower interest rates until inflation shows consistent movement toward the 2 percent target.
Eurozone Economic Challenges:
– Weaker Growth Metrics: The Euro
Read more on EUR/USD trading.