EUR/USD Trend Still Remains Bearish

Anthony Gallagher
Anthony Gallagher

4 November 2019

USD/EUR forex trading

  • EUR/USD is above 1.1150
  • Major downtrend still intact
  • US Federal Reserve cut rates by 25bps last week

The EUR/USD pair closed last week at 1.1167 and is trading this Monday around 1.1150 level. This currency pair is still unable to surpass the 1.1200 resistance level. According to the technical analysis, the direction remains bullish in the short term.

The pair was supported recently by the fact that the United Kingdom and the European Union reached an agreement on the UK’s departure from the Union.

US growth remains moderate

The US economic calendar remains light this Monday. The US released the Nonfarm Payroll report last Friday, with the country adding 128,000 new jobs and surpassing market expectations.

On the other side,  the unemployment rate has reached 3.6%, which was in line with expectations. According to analysts, this is quite a positive Nonfarm Payroll report. It is also important to add that the monthly wage growth showed no relevant deviations.

the Federal Reserve cut rates by 25bps as expected last week, giving strength to this pair

It is important to mention that the Federal Reserve cut rates by 25bps as expected last week, giving strength to this pair. The European Central Bank left its monetary policy unchanged at its latest meeting, as the EU economic slowdown continues entering Q4.

The inflation in the EU is still below expectations, and this situation confirms speculation that the ECB won’t hike rates until 2020. ECB President Christine Lagarde also warned that the uncertainty related to geopolitical factors is a threat to economic growth.  According to analysts, the US has a moderate economic growth, and the policymakers probably won’t cut rates anytime soon.

Technical analysis

In the last 30 days, this pair has been in the “bullish” phase, with the price advancing from 1.090 to above 1.118. On the other side, when we take a look at the bigger picture, we can notice that the bearish trend remains intact.

EURUSD Technical Analysis

EUR/USD technical analysis

The market is currently testing several different things that could drive it lower. One factor here would be the 38.2% Fibonacci retracement level, which is below current pricing. On this chart, support and resistance levels are noted: 1.1200, 1.1300, and 1.1400 represent the current resistance levels, while 1.1100 and 1.1000 are current support levels. While an upward correction is possible, the risk is clearly leaning towards the downside.

If the price breaks the first strong support at 1.1100, we have an open way to 1.1000 support. If the price jumps above 1.1200, it will probably reach 1.1230 level very soon. The next target could be located around 1.1250.

Background noise and conclusion

Keep in mind that this currency pair is highly sensitive to US-China trade relations and to Brexit. Encouraging headlines correlated to the former were published at the beginning of the day, indicating that progress has been made in trade negotiations.

Signs of a further economic slowdown in the Union keep the upside limited for this currency pair for now. The latest news from the EU was quite discouraging, while the US economy remains healthy.

According to the fundamental and technical analysis, the major direction for this pair remains “bearish”. As long the price is below the 1.1400 level, the risk is clearly leaning towards the downside.

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