EUR_USD closed at 1.04154 last week, marking the lowest low in 2 years. This significant drop indicates strong bearish pressure on the pair.
Fundamental Analysis
The US Dollar has shown persistent strength, driven by robust economic data and hawkish signals from Federal Reserve officials. Weekly Initial Jobless Claims fell to 213,000, indicating a resilient labour market, while Existing Home Sales rose by 3.4% in October. These positive indicators have reduced expectations for Fed rate cuts, with the likelihood of a December cut decreasing to 55.9%.
In contrast, the Eurozone is facing economic challenges. Preliminary PMI data revealed contractions in both Manufacturing and Services sectors, with the Eurozone Composite PMI dropping to 48.1. Germany, the bloc's largest economy, saw its Q3 GDP growth revised downward to just 0.1%. These weak indicators suggest the European Central Bank (ECB) may need to consider further monetary easing.
Technical Analysis
EUR/USD is currently under significant bearish pressure after breaking below the powerful long-term support level of 1.0400. This breakdown is likely to accelerate the active weekly downward which started earlier from the major multi-year resistance level of 1.1200.
Key levels to watch:
- Support: 1.0300 (next major support level)
- Resistance: 1.0500 (previous support, now resistance)
The pair has broken out of a long-term flat pattern on the weekly timeframe, signaling potential for further downside movement.
Outlook for the Week
Given the technical breakdown and fundamental factors favoring the US Dollar, EUR/USD is likely to continue facing downward pressure in the coming week. The pair can be expected to test the next support level at 1.0300.
Traders should monitor these key events:
- FOMC Minutes (11/26/2024)
- US GDP Data (11/27/2024)
- Eurozone CPI Data (11/28/2024)[2]
Likely Range for Next Week
Based on the current technical and fundamental factors, the likely range for EUR/USD next week could be:
- Lower bound: 1.0300 (next major support level)
- Upper bound: 1.0500 (previous support, now resistance)
Based on the current market dynamics and technical analysis, we anticipate the euro's downward trajectory to persist without a significant retracement. The breach of the 1.0400 level on Friday has confirmed the bearish sentiment, making it a crucial level to monitor.
Our analysis suggests that the EUR/USD pair is likely to continue its descent towards the 1.0300 support level in the near term. While a move towards parity (1.0000) could be viewed as a relatively optimistic outcome, market participants should be prepared for the potential of a more pronounced decline. Key support levels to watch include 1.0335, 1.0220, and 1.0100. A breach of these levels could potentially lead to a test of the previous significant low near 0.9500.
Trade:
Breakout Continuation Short Trade
Setup: Sell EUR/USD on a pullback to resistance at 1.0450–1.0480.
Rationale:
The 1.0450–1.0480 zone marks the previous breakdown area, now likely to act as resistance. Pullbacks to this zone could provide an opportunity to join the prevailing bearish trend.
Entry: Place a sell limit order at 1.0450.
Stop Loss: 1.0520 (70 pips risk).
Take Profit: 1.0330 (120 pips reward).
Risk/Reward Ratio: 1:1.71.
Probability: High, as EUR/USD is trending lower, and this setup aligns with the momentum.
Fundamental Analysis
The US Dollar has shown persistent strength, driven by robust economic data and hawkish signals from Federal Reserve officials. Weekly Initial Jobless Claims fell to 213,000, indicating a resilient labour market, while Existing Home Sales rose by 3.4% in October. These positive indicators have reduced expectations for Fed rate cuts, with the likelihood of a December cut decreasing to 55.9%.
In contrast, the Eurozone is facing economic challenges. Preliminary PMI data revealed contractions in both Manufacturing and Services sectors, with the Eurozone Composite PMI dropping to 48.1. Germany, the bloc's largest economy, saw its Q3 GDP growth revised downward to just 0.1%. These weak indicators suggest the European Central Bank (ECB) may need to consider further monetary easing.
Technical Analysis
EUR/USD is currently under significant bearish pressure after breaking below the powerful long-term support level of 1.0400. This breakdown is likely to accelerate the active weekly downward which started earlier from the major multi-year resistance level of 1.1200.
Key levels to watch:
- Support: 1.0300 (next major support level)
- Resistance: 1.0500 (previous support, now resistance)
The pair has broken out of a long-term flat pattern on the weekly timeframe, signaling potential for further downside movement.
Outlook for the Week
Given the technical breakdown and fundamental factors favoring the US Dollar, EUR/USD is likely to continue facing downward pressure in the coming week. The pair can be expected to test the next support level at 1.0300.
Traders should monitor these key events:
- FOMC Minutes (11/26/2024)
- US GDP Data (11/27/2024)
- Eurozone CPI Data (11/28/2024)[2]
Likely Range for Next Week
Based on the current technical and fundamental factors, the likely range for EUR/USD next week could be:
- Lower bound: 1.0300 (next major support level)
- Upper bound: 1.0500 (previous support, now resistance)
Based on the current market dynamics and technical analysis, we anticipate the euro's downward trajectory to persist without a significant retracement. The breach of the 1.0400 level on Friday has confirmed the bearish sentiment, making it a crucial level to monitor.
Our analysis suggests that the EUR/USD pair is likely to continue its descent towards the 1.0300 support level in the near term. While a move towards parity (1.0000) could be viewed as a relatively optimistic outcome, market participants should be prepared for the potential of a more pronounced decline. Key support levels to watch include 1.0335, 1.0220, and 1.0100. A breach of these levels could potentially lead to a test of the previous significant low near 0.9500.
Trade:
Breakout Continuation Short Trade
Setup: Sell EUR/USD on a pullback to resistance at 1.0450–1.0480.
Rationale:
The 1.0450–1.0480 zone marks the previous breakdown area, now likely to act as resistance. Pullbacks to this zone could provide an opportunity to join the prevailing bearish trend.
Entry: Place a sell limit order at 1.0450.
Stop Loss: 1.0520 (70 pips risk).
Take Profit: 1.0330 (120 pips reward).
Risk/Reward Ratio: 1:1.71.
Probability: High, as EUR/USD is trending lower, and this setup aligns with the momentum.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.