EUR/USD is expected to continue to move lower

  •   11/02/2020 - 15h07
  •   HARMANT Adeline

Let's take a complete look at the EUR/USD cross situation on Monday, February 11th as the dollar is supported by fundamental data and technical analysis is also leaning towards an exit up the bearish channel of this currency pair.

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EUR/USD is expected to continue to move lower
Image copyright: killerturnip - Flickr

Fundamentals that penalize the Euro and support the Dollar :

While the EUR/USD cross seems to be in a downward trend since last week, and following disappointing European statistics versus encouraging US statistics, several elements continue to support this scenario for selling at the beginning of this week.

Indeed, although euro area PMIs were higher than estimated, retail sales showed their largest decline since 2008 for the month of December. There have also been significant declines in industrial orders and industrial production in Germany and an economic recovery that is struggling to materialize in Europe, in contrast to China and the United States. However, it is possible that this recovery will be seen in the upcoming statistics for January due to the rebound in the PMI indices.

In the United States, the statistics remain mostly positive with a strong stimulation of the real estate market and household consumption thanks to more accessible and cheaper loans due to the fall in interest rates in 2019. In fact, for the third consecutive week, the average 30-year borrowing rate ended its downward slide last week and was at its lowest level since December 2016. This data is rather positive for the growth of the American market, which presents growing needs for new construction and expectations of a significant increase in household consumption via the savings made by this rate cut. It should be noted that mortgages are generally at variable rates in the USA.

 

Downward forecast for the coming weeks and months:

As for the technical analysis of this value, the outlook for the EUR/USD has also been bearish since the cross came out of its upbeat bottom at the end of January. The new target for the theoretical price of this cross is now $1,0879, the lowest level reached in 2019.

Of course, if the cross would record an exit from the top of the bearish channel and rebound above the $1.10 threshold, this would invalidate the downside outlook we just mentioned. The EUR/USD has been moving in this channel since the beginning of 2020.

In conclusion, and in view of both the fundamental and technical data of the EUR/USD analysis, we recommend that you take a selling position on this stock for the coming sessions.