Key Highlights

  • EUR/USD followed a bearish path and broke the 1.1080 support area.
  • A key bearish trend line is forming with resistance near 1.1060 on the 4-hours chart.
  • The Euro Zone Manufacturing PMI in Jan 2020 (Prelim) increased from 46.3 to 47.8.
  • The German IFO Business Climate Index could increase from 96.3 to 97.0 in Jan 2020.

EUR/USD Technical Analysis

This past week, EUR/USD struggled to gain momentum above the 1.1120 area. As a result, the Euro resumed its decline and broke the 1.1080 support to enter a bearish zone

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Looking at the 4-hours chart, the pair broke many supports near the 1.1060 level and declined towards 1.1000. It seems like the bears rejected the price above the 1.1080 level. Besides, the pair is now trading well below the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

On the downside, there are a couple of decent supports near the 1.1000 level. If there is a daily close below the 1.1000 level, there are chances of a strong drop in the near term.

On the upside, there are key hurdles forming near 1.1060 and 1.1080. Moreover, there is a key bearish trend line forming with resistance near 1.1060 on the same chart.

To move into a positive zone, EUR/USD must settle above 1.1080 and then gain pace above the 100 SMA. If not, it is likely to extend its decline below 1.1000.

Fundamentally, the Euro Zone Manufacturing Purchasing Managers Index (PMI) for Jan 2020 (Prelim) was released by the Markit Economics. The market was looking for an increase from 46.3 to 46.8.

The actual result was slightly better than the forecast, as the Euro Zone Manufacturing PMI increased to 47.8. Still, it was well below the neutral level of 50 and posted contraction.

The report added that:

Flash PMI data for January indicated that the euro zone economy failed to pick up growth momentum at the start of 2020. Business activity increased at the same slight pace as was seen in the final month of 2019 as the rate of expansion in new orders remained muted.

Overall, EUR/USD remains at a risk of more losses unless it climbs above the 1.1080 resistance. Besides, GBP/USD and USD/JPY are signaling short term downsides.

Upcoming Economic Releases

  • German IFO Business Climate Index for Jan 2020 – Forecast 97.0, versus 96.3 previous.
  • US New Home Sales for Dec 2019 (MoM) – Forecast +0.8% versus +1.3% previous.

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