EUR/USD Forecast: Correcting Overbought Conditions, Still Far From Bearish

EUR/USD Current Price: 1.1945

• Vaccine hopes fell short of boosting demand for high-yielding assets.
• The focus shifts to the official November US ISM Manufacturing PMI.
• EUR/USD correcting overbought conditions, still far from bearish.

The EUR/USD pair reached a November high of 1.2002 this Monday, quickly retreating afterwards to close the day in the red around 1.1940. The American currency surged after Wall Street’s opening, helped by falling US indexes and profit-taking as the month came to an end. Investors are looking beyond encouraging coronavirus vaccine news, as Moderna reported a 94% effectiveness, while several countries are rushing to allow the emergency use and begin vaccination this December.

On the data front, Germany published the preliminary estimate of November inflation, which came in worse than anticipated, falling by 0.3% YoY, and interrupting EUR’s rally. US data was mixed, as Pending Home sales fell 1.1% in October, missing expectations, while the November Chicago PMI contracted to 58.2. The November Dallas Fed Manufacturing Business Index printed at 12, better than the 7.4 expected.

This Tuesday, Germany will publish the November unemployment rate, while Markit will publish the final readings of its November Manufacturing PMIs. The US will also release the official ISM Manufacturing PMI, foreseen at 57.9 from 59.3 in the previous month.

EUR/USD short-term technical outlook

The EUR/USD pair is far from bearish, despite it closes the day in the red. The 4-hour chart shows that the price is still developing above all of its moving averages, now approaching the 20 SMA at around 1.1930. Technical indicators are flat within positive levels, indicating the absence of selling interest. Speculative interest will probably continue to challenge the 1.2000 barrier, although the pair needs to break above 1.2011 to confirm a new leg higher.

Support levels: 1.1920 1.1880 1.1840  

Resistance levels: 1.2010 1.2050 1.2090

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