EUR/USD Forecast: Bears take advantage of thin market conditions

EUR/USD Current price: 1.0955

• EU manufacturing output remained in contraction territory at the end of 2023.
• The focus this week falls on European inflation and American employment figures.
• EUR/USD reaches oversold conditions in the near term, maintains the bearish tone.

The EUR/USD pair keeps retreating from the December peak at 1.1139, accelerating its slide through the 1.1000 threshold ahead of the United States (US) opening. The US Dollar gathers momentum in thin market conditions as market players return to their desks ahead of first-tier data that could set the tone for the rest of the month. On the one hand, the Eurozone will release inflation updates, while on the other, the US will unveil employment-related figures ahead of the December Nonfarm Payrolls report (NFP), scheduled for next Friday.

Meanwhile, the macroeconomic calendar showed that “the Eurozone manufacturing sector remained stuck in contraction at the end of 2023, with output continuing to fall and factory job losses extending into a seventh successive month,” according to the S&P Global/Hamburg Commercial Bank monthly report. The December Manufacturing PMI was confirmed at 44.4, slightly better than the previous 44.2. The German index was reported at 43.3. The American session will bring the US figure, which is expected to print at 48.2.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.0950 price zone and is at its lowest in almost two weeks. The daily chart shows prevalent selling interest, although the case for a continued slump is still unclear. Despite falling for a third consecutive day, the pair holds well above all its moving averages, with the 20 Simple Moving Average  (SMA) heading sharply north above the longer ones while providing dynamic support at 1.0925. At the same time, technical indicators turned south, but correcting overbought conditions and still developing within positive levels.

The near-term picture favors a continued slide. In the 4-hour chart, technical indicators head lower almost vertically, currently approaching oversold territory. Meanwhile, EUR/USD accelerated its slump below a mildly bearish 20 SMA, while a still bullish 100 SMA stands in the 1.0920 price zone, reinforcing the support area.

Support levels: 1.0925 1.0880 1.0845  

Resistance levels: 1.0990 1.1015 1.1050