EUR/USD Forecast: Bearish, Giving Up Half Of Its November Gains

EUR/USD Current Price: 1.1771

• The market´s sentiment remained positive, with the dollar making the most out of it.
• ECB’s President Lagarde warned about the negative effects of exchange developments on inflation.
• EUR/USD is bearish, giving up half of its November gains.

The EUR/USD pair extended its weekly decline to 1.1745, to stabilize in the 1.1770 price zone during American trading hours, as volatility shrank due to a US holiday and an empty macroeconomic calendar. Equities maintained the positive bias, and in the US, the Nasdaq Composite was the best performer, following a poor performance on Tuesday. Meanwhile, the number of new coronavirus cases in the US and Europe is in a clear upward trend. The US reported a record of over 130K new contagions in one day, while Italy announced new restrictive measures to curb contagions.

ECB’s President Christine Lagarde offered the opening remarks at the ECB Forum on Central Banking. Among the most notable comments, she said that the recovery from a services-led recession tends to be slower than from a durable goods-led one, also mentioning that developments in the exchange rate may hurt the path of inflation recovery.

This Thursday, Germany will publish the final version of its October inflation, while the EU will publish September Industrial Production figures. The US will publish October CPI and weekly unemployment figures.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair is trading around the 50% retracement of its latest daily advance, and the 4-hour chart shows that the risk is now on the downside. The pair is trading well below its 20 SMA, which turned south around 1.1840, while the price is also below the 100 SMA. Technical indicators have pared their declines well into negative territory but give no signs of turning higher. The 61.8% retracement of the mentioned rally comes at 1.1725, providing immediate static support.

Support levels: 1.1725 1.1680 1.1630

Resistance levels: 1.1800 1.1840 1.1885  

View Live Chart for the EUR/USD

Image sourced from Pixabay