The EUR/USD pair continues to face significant resistance and bearish pressure as it closes the week trading below 1.0300. On Friday, the pair traded at around 1.0250, just above the multi-year low of 1.0212 posted earlier that day. The immediate resistance level stands at 1.0197, corresponding to the September 2022 monthly high, while the next support is anticipated at the 1.0100 mark. The downturn in the pair is attributed to the strength of the US Dollar (USD) and several technical indicators suggesting further decline.
Technical analysis reveals that the EUR/USD pair is oversold on the weekly chart. The Relative Strength Index (RSI) remains on a downward trajectory despite being critically low at 28. Moreover, the Momentum indicator has only shown a modest bounce from extreme levels, remaining well below its midline, indicating no impending reversal. The 20 Simple Moving Average (SMA) has accelerated its slump, crossing below a flat 100 SMA—a clear signal of sellers’ dominance in the market.
The market observed a bearish crossing of the 100 SMA below the 200 SMA on the same chart, after maintaining its position above for nearly five months. This crossover further reinforces the prevailing bearish trend. The pair posted lower lows after struggling to break through the bearish 20 SMA, which currently acts as dynamic resistance at approximately 1.0380.
Despite being oversold, there is significant room for the EUR/USD to extend its decline. Without any technical signs suggesting an interim bottom, the pair remains under selling pressure for the fifth consecutive week. The Euro's struggle is exacerbated by the strength of the US Dollar, which has retained its overall robustness throughout the week.
Economic data from the Eurozone also played a role in shaping market sentiment. The Eurozone Harmonized Index of Consumer Prices (HICP) rose by 2.7% year-over-year in December, aligning with expectations. However, the Producer Price Index (PPI) indicated a more substantial drop than anticipated, decreasing by 1.2% year-over-year in November, compared to a decline of 3.3% previously recorded and an expected dip of 1.3%.
In Germany, preliminary estimates for the Harmonized Index of Consumer Prices (HICP) showed a higher-than-expected increase of 2.8% year-on-year, surpassing both the anticipated rate of 2.6% and the previous figure of 2.4%. These economic indicators highlight underlying inflationary pressures within the Eurozone but have failed to provide any substantial support to the Euro against its American counterpart.
Market participants continue to monitor these developments closely as they assess potential impacts on monetary policy in both regions. The European Central Bank (ECB) may face increasing pressure to address these economic challenges, while the Federal Reserve's stance on interest rates remains a crucial factor influencing USD strength.