This article is a rewritten and expanded version of the original piece titled “EUR/USD Forex Signal – 18/11: Bearish Outlook (Chart),” originally authored by Crispus Nyaga and published on MENAFN.
EUR/USD Forecast and Technical Analysis – A Bearish Outlook
The EUR/USD pair, one of the most actively traded in the global forex market, continues to attract considerable attention amid heightened geopolitical risks, mixed economic data, and monetary policy decisions out of the eurozone and the United States. As of recent sessions leading to November 18, the EUR/USD has exhibited sustained bearish momentum, raising questions about whether the downtrend will continue or if a rebound is on the horizon.
This report offers an in-depth technical and fundamental analysis of the EUR/USD currency pair, including key levels to watch, economic developments affecting the euro and the dollar, and potential trading strategies.
Recent Performance of EUR/USD
In recent trading sessions, the EUR/USD currency pair demonstrated significant downside pressure, indicating seller dominance in the market. Key highlights of the pair’s performance include:
– EUR/USD fell below the crucial 1.1800 support level, a key psychological and technical barrier
– The pair reached lows not seen in several weeks, reflecting a return in US dollar strength
– A failure to hold above previously established support levels suggests that investor sentiment has tilted bearish
This performance mirrors broader market dynamics, including responses to economic data releases, central bank policy directions, and market sentiment toward major global currencies.
Factors Influencing EUR/USD
Several fundamental factors continue to drive the bearish sentiment in the EUR/USD pair. Among the most influential are:
1. Weak Eurozone Economic Indicators
Recent data out of the eurozone has painted a subdued economic picture, which has put downward pressure on the euro. Key indicators contributing to the euro’s weakness include:
– Weaker-than-expected GDP growth among major EU economies
– Diminishing consumer confidence numbers
– A slowdown in the services and manufacturing sectors, particularly in Germany and France
– Limited progress on fiscal stimulus discussions within EU financial institutions
These data points raise ongoing concerns over the eurozone’s post-pandemic recovery and cast doubt on the European Central Bank’s (ECB) ability to normalize policy without further economic support.
2. US Dollar Strength
On the flip side, a strengthening US dollar continues to undermine the EUR/USD pair. Factors behind the dollar’s current strength include:
– Positive US economic data, including robust retail sales and improved jobless claims
– Hawkish tones from several Federal Reserve officials regarding potential interest rate hikes
– A stronger yield on US Treasury bonds, increasing appeal to global investors
– A rotation into USD-denominated assets amid ongoing uncertainty in global markets
The dollar’s safe-haven status has reasserted itself as market participants seek shelter in the face of rising global risk factors, including COVID-19 developments and geopolitical tensions.
3. Central Bank Monetary Policies
Both the ECB and the US Federal Reserve play crucial roles in shaping the trajectory of EUR/USD. At present, discrepancies in the monetary policy approaches of the two institutions are a major source of volatility:
– The ECB has adopted a more dovish, wait-and-see approach. It continues to support ultra-loose monetary policy by keeping interest rates near record lows and maintaining its asset purchase programs.
– The Federal Reserve, however, has progressively signaled that tapering of its bond-buying program is underway and has indicated a path toward interest rate hikes in 2022.
This divergence in outlook leads to a widening spread between euro and dollar yields, fueling increased demand for the USD and further pressuring the euro.
Technical Analysis: Bearish Signals Persist
A look at the technical charts of the EUR/USD pair reinforces the bearish perspective as of mid-November. The charts offer several key takeaways:
Trend Indicators
– The currency pair is trading well below its 50-day and 200-day exponential moving averages (EMAs). This suggests sustained downside momentum and confirms the prevailing bearish
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