EUR/USD Forecast: Pressure mounts on the shared currency

EUR/USD Current price: 1.1192

• The worsening coronavirus situation in Europe undermined demand for the EUR.
• US inflation continued to run hot in October, hinting at soon to come Fed’s action.
• EUR/USD is trading below 1.1200 and could keep falling despite oversold conditions.

Persistent demand for the American currency drove EUR/USD to a fresh 2021 low of 1.1185, with the pair currently trading a few pips above the level. Demand for safe-haven assets was high, as global equities traded dully.

Macroeconomic data fuel the dismal mood, as Germany published the November IFO survey, which showed that the Business Climate contracted to 96.5, falling for a fifth consecutive month. Expectations dropped to 94.2 while the assessment of the current situation contracted to 99.  On the other hand, the US published Q3 Gross Domestic Product was upwardly revised to 2.1% in Q3, slightly below the 2.2% expected, while inflation in the country hit a 30-year high, as the core PCE Price Index jumped to 4.1% YoY in October. Among other things, the US also reported that Initial Jobless Claims contracted to 199K in the week ended November 19, the lowest since the pandemic started.

Meanwhile, in Europe, concerns rotate around soaring coronavirus cases as the northern hemisphere heads into the winter. Lockdowns and vaccine mandates are on the table in multiple countries, and a clearer picture will be seen ahead of the weekend, as Germany and France are expected to announce fresh measures to deal with the latest outbreak.

As the day comes to an end, the FOMC published the Minutes of its November meeting. The document showed that policymakers believe they should be prepared to adjust the pace of the asset purchases tapering and raise the target range for the federal funds rate sooner than currently anticipated should inflation continue to run hot. Still, the market’s reaction was quite limited as there were no surprises in the statement.

Germany will publish a revision of its Q3 GDP on Thursday, while the European Central Bank will release the Monetary Policy Meeting Accounts. US markets will be closed amid the Thanksgiving holiday.

EUR/USD short-term technical outlook

The EUR/USD is extremely oversold but still bearish, as the daily chart shows that technical indicators offer modest bearish slopes within extreme levels. In the same chart, the 20 SMA keeps heading lower over 200 pips above the current level while widening the distance with the longer ones, reflecting strong selling interest.

The 4-hour chart also indicates that the pair could fall further as sellers are adding shorts on approaches to a bearish 20 SMA. Technical indicators have lost their bearish strength but hold around intraday lows, with the RSI in oversold territory. A strong support area comes around 1.1160, where the pair bottomed in June 2020. A break below the latter could see the pair test the 1.1000 figure in the next few days.

 Support levels: 1.1160 1.1120 1.1075

Resistance levels: 1.1210 1.1250 1.1290

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