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EUR/USD At Clear Risk Of Further Declines

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Technical analysis of Forex market

Key Highlights

The Euro formed a significant top at 1.1514 and declined heavily against the US Dollar.

EUR/USD broke a few important supports such as 1.1440 and 1.1400.

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The German Trade Balance in Dec 2018 posted a surplus of €19.4B, better than the €18.4B forecast.

UK GDP for Q4 2016 (Preliminary) will be released today, which could grow 0.2% (QoQ).

EURUSD Technical Analysis

After trading as high as 1.1514, the Euro started a major downward move against the US Dollar. The EUR/USD pair gained bearish momentum and broke key supports near the 1.1400 level.

Looking at the 4-hours chart, the pair clearly moved into a bearish zone below the 1.1400 support plus the 100 (red) simple moving average (4-hours) and 200 (green) simple moving average (4-hours).

During the decline, there was a break below the 61.8% Fib retracement level of the last wave from the 1.1289 low to 1.1514 high. Moreover, there was a break below a connecting bullish trend line, with support at 1.1428 on the same chart.

The pair is now trading well below the 1.1360 support and the 76.4% Fib retracement level of the last wave from the 1.1289 low to 1.1514 high. Therefore, there is a risk of further declines towards the 1.1289 low or the 1.1260 support level.

If there is an upside correction, the previous supports at 1.1360, 1.1380 and 1.1400 are likely to act as strong resistances for buyers in the near term.

Fundamentally, the German Trade Balance report for Dec 2018 was released this past Friday by the Statistisches Bundesamt Deutschland. The market was looking for a trade surplus of €18.4B, compared with the last €19.0B.

However, the result was better than the forecast as there was a surplus of €19.4B, but the last reading was revised down from €19.0B to €18.9B. Exports of goods and services in Dec 2018 increased 1.5%, better than the last -0.3% (revised), and Imports of goods and services increased 1.2%.

The report added that:

Based on provisional data, German exports increased by 3.0% and imports by 5.7% in 2018 year on year. Exports and imports in 2018 exceeded the record highs recorded in 2017 when goods had been exported to the value of 1,279.0 billion euros and imported to the value of 1,031.0 billion euros.

The current price action suggests a bearish structure for EUR/USD, which could result in more losses in the coming sessions.

Economic Releases to Watch Today

  • Swiss CPI for Jan 2019 (YoY) – Forecast +0.6%, versus +0.7% previous.
  • UK GDP for Q4 2016 (Preliminary) (QoQ) – Forecast +0.2%, versus +0.6% previous.
  • UK Industrial Production for Dec 2018 (MoM) – Forecast -0.2%, versus -0.4% previous.
  • UK Manufacturing Production for Dec 2018 (MoM) – Forecast +0.1%, versus -0.3% previous.
  • UK Trade Balance non-EU for Dec 2018 – Forecast £-3.592B, versus £-3.925B previous.

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