EUR/USD Forecast: Consolidating losses near a critical support level

EUR/USD Current price: 1.0874

• Financial markets await US Retail Sales for the next directional movement.
• Risk mood is off amid market players recalculating bets on upcoming rate cuts.
• EUR/USD maintains the bearish bias, could accelerate its slump once below 1.0845.

The EUR/USD pair extended Tuesday’s slump to 1.0855 at the beginning of the day, slowly trimming intraday losses and currently trading flat in the 1.0870 price zone. Comments from US Federal Reserve (Fed) officials made investors hesitate about rate-cut odds, sending stocks sharply down, and Treasury yields firmly up.

Asian stocks edged lower, further supporting the Greenback, as softer-than-anticipated Chinese data spurred concerns. The Gross Domestic Product posted a quarterly increase of 1% in the final quarter of 2023, while the annual comparison printed at 5.2%, below the expected 5.3%, although better than the previous 4.9%.

European stocks replicate their overseas counterparts, trading in the red and weighing on Wall Street futures. In the meantime, US Treasury yields maintain their positive tone, with the 10-year note currently offering 4.07% and the 2-year note yielding 4.28%.

Data-wise, the Eurozone confirmed the December Harmonized Index of Consumer Prices  (HICP) at 2.9%, while the US published  MBA Mortgage Applications for the week ended January 12, up 10.4%, up from the previous 9.9%. The country will publish December  Retail Sales and Industrial Production for the same month, while a few Fed speakers will be on the wires.

EUR/USD short-term technical outlook

The  EUR/USD pair is at risk of extending its slide, according to technical readings in the daily chart. The pair develops far below a mildly bearish 20 Simple Moving Average (SMA) while approaching a flat 200 SMA, providing support at 1.0845. At the same time, the Momentum indicator heads firmly south within negative levels, while the Relative Strength Index (RSI) indicator hovers around 42, without signs of downward exhaustion.

Bears retain control in the near term. The 4-hour chart shows EUR/USD develops below all its moving averages, and with the 20 SMA accelerating its slide below a flat 200 SMA, reflecting sellers’ strength. Finally, technical indicators grind lower near oversold readings, lacking momentum amid the limited intraday range.

Support levels: 1.0845 1.0800 1.0760

Resistance levels: 1.0890 1.0940 1.0980