The EUR/USD currency pair has faced heavy negative undertow, trading right around a new January low just south of the 1.1600 barrier. According to market experts, the pair is set to continue its downward trajectory as technical signals show a bearish outlook. This trend emerges as traders reflect on a mixed bag of macroeconomic factors to include yesterday’s United States jobless claims data.
In the past few trading sessions, the EUR/USD remains to the downside within its well defined range. Immediate resistance is at the 100-day SMA (Simple Moving Average) 1.1665. The duo is having a tough time getting past this point. For now, with pressure from the 20 SMA at 1.1651 limiting any short-term topside recoveries.
Right now EUR/USD is trading underneath each one of its moving averages, a sign of a severely bearish trend. Even the 20-period SMA has shifted lower, crossing down below the 200-day and 100-day SMAs. This movement adds more fuel to the negative market sentiment fire, which is already critical. The 200-day SMA, currently at 1.1583, is the next line of immediate support for the currency pair.
The technical indicators are extremely bearish. The Relative Strength Index (RSI) for EUR/USD has increased bearish momentum. It now stands at about 31, meaning the duo are likely oversold. The Momentum indicator has recently plummeted and remained well below zero. It has fallen deeper below its midline, indicating that downward pressure is on the rise.
Traders are waiting to see how the pair reacts to an important support level at 1.1590. The potential for a breakout there continues to be quite strong. If the EUR/USD were to break below this support level, larger drops may be expected. Conversely, the 20-day SMA is located at 1.1713. As for the upside, this level acts as immediate resistance if the pair attempts to bounce back.
The broader economic picture still looms large over market sentiment. U.S. labor market remains tight as first time jobless claims spiked by just 198k. So this large increase did take place during the week ending January 10. The increase in claims will certainly introduce some market volatility. Consequently, investors are likely to respond by ramping up or increasing pressure on the EUR/USD as the economic foundation seems more stable.