EUR/USD Forecast: Further Falls Cannot Be Excluded After Hitting A 6-week Low

• The EUR/USD has hit a 6-week low as the US Dollar gains ground and stocks fall.
• The technical picture remains bearish, with further falls on the cards.

The EUR/USD reached a new 6-week low at $1.2180, the lowest since January 17th. The dominant driver of the pair is the US Dollar that continues rallying on the back of Powell's comments. Fed Chair Jerome Powell hinted at an increased pace of rate hikes in his testimony on Tuesday. Answering a question about the dot-plot, last published in December, Powell said that things have changed since then, listing positive developments. This sent the greenback higher and the trend continues. 

The most recent drop of the EUR/USD is also accompanied by a slide in European stocks. The worsening market mood is supportive of the Japanese Yen and the US Dollar and overshadows the data. Two political events await the common currency over the weekend: the results of a vote in Germany's SPD party on another coalition with Angela Merkel, and Italy's general elections. See how they could move the euro here.

Markit's euro-zone Manufacturing PMI data was mixed. While still pointing to robust growth in the sector, the figures from France and Italy missed expectations while the German and Spanish PMI figures beat expectations. The euro-zone Unemployment Rate is at 8.6 percent, as expected. 

The focus soon shifts to the US, with a big bulk of economic indicators. At 13:30 GMT, the US releases the Fed's favorite inflation measure, the Core PCE Price Index. More on that here. In addition, Personal Spending and Personal Consumption are published at the same time. 

At 15:00 GMT, Powell begins testifying in front of a Senate Committee and may repeat the same messages. The ISM Manufacturing PMI is out at the same time. See the preview here. 

EUR/USD Technical Analysis: Bears are Advancing

The pair is taking one support line after the other. The break below uptrend support (purple line on the chart) opened the door to a break below the 50-day Simple Moving Average. The next line to watch is the mid-January low of $1.2165, which is getting closer. 

A break below that level opens the door to the 2017-peak at $1.2090 (also a double top) and then to the round number of $1.2000. The RSI also points to further losses after slipping below 50. 

Looking up, weak resistance awaits at $1.2205, a trough in mid-February, and this is followed by $1.2260, a low point toward the end of that month. Further above, $1.2360 was a swing high and provides further resistance.