EUR/USD Nosedives Below 1.0850, Recovery Could Be Capped


Key Highlights

  • EUR/USD declined heavily below the 1.0900 and
    1.0850 support levels.
  • A major bearish trend line is forming with
    resistance near 1.0865 on the 4-hours chart.
  • The Euro Area GDP increased 0.9% in Q4 2019
    (Prelim), down from the last revised 1.2%.
  • The German GDP rose 0.4% in Q4 2019 (Prelim), less
    than the last revised 0.6%

EUR/USD Technical Analysis

This past week, the Euro extended its decline below the 1.0900 support area against the US Dollar. EUR/USD even broke the 1.0850 support and traded to a new 2020 low.

EUR/USD Technical Analysis Euro US Dollar

Looking at the 4-hours chart, the pair failed to stay above
the key 1.0900 support area and settled well below both the 100 simple moving
average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

It opened the doors for more losses and the pair traded
towards the 1.0820 support area. At the moment, the current price action is
highly bearish, suggesting more losses below the 1.0820 and 1.0800 support

On the upside, there are many hurdles forming near the
1.0870 and 1.0900 levels. Besides, there is a major bearish trend line forming
with resistance near 1.0865.

To start a strong recovery, EUR/USD must move back above the
1.0900 pivot level. If not, it is likely to continue lower below 1.0800.

Fundamentally, the Euro Area Gross Domestic Product report
for Q4 2019 (Prelim) was released by the Eurostat. The market was looking for a
1% rise in the GDP compared with the same quarter a year ago.

The actual result was very disappointing, as the Euro Area
Gross Domestic Product grew only 0.9%, down from the last revised growth rate
of 1.2%. Looking at the quarterly change, there was a 0.1% rise in the GDP,
similar to the forecast.

The report added:

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 0.9% in the euro area and by 1.2% in the EU27in the fourth quarter of 2019, after +1.2% and +1.5% respectively in the previous quarter.

Overall, EUR/USD could struggle to recover above 1.0900 in the near term. Conversely, there was a nice upward move in GBP/USD above the 1.3000 resistance area.

Upcoming Economic Releases

  • Eurogroup Meetings.
  • German Buba Monthly Report.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

Aayush’s latest posts

Read more here