EUR/USD is oversold, but fundamentals remain negative
EUR/USD hit new 22-month lows at 1.1140, breaking below the previous 2019 low of 1.1176. Both sides of the equation contributed to the fall. The German IFO Business Climate published on Wednesday continued reverberating for long hours and weighed heavily. The disappointing score of 99.2 points added to concerns about the health of Europe’s locomotive.
On the other side of the Atlantic, the greenback continued gaining ground. Despite a slowdown, the US economy is outperforming its peers in the developed world and the Federal Reserve is not warming up to a rate cut.
The strength of the USD will be tested later on with the publication of the Durable Goods Orders report for March. The data reflects the investment and also feeds into the all-important GDP data published on Friday.
A Brexit resolution remains far as the main parties in the UK have not made any progress in talks. UK PM Theresa May survived another attempt to facilitate her ousting and she is reportedly considering another vote on her Brexit deal next week. Another failure is likely.
There has been no news on the trade front and markets are awaiting developments on high-level meetings due next week.
All in all, fundamentals are pointing to further falls, but a lot depends on US data.
EUR/USD Technical Analysis
The Relative Strength Index on the four-hour chart is at around 22 at the time of writing, showing clear oversold conditions. The current state implies a rebound of sorts. A similar situation in early March led to a substantial recovery. Will we see this again? Nothing is certain. Other technical point to the downside. Euro/dollar is trading below the 50, 100, and 200 Simple Moving Averages and Momentum remains to the downside.
The fresh 2019 and a 22-month low of 1.1140 is the first line of support. 1.1115, 1.1025, and 109.00 all date back to 2017.
Resistance awaits at the previous yearly trough of 1.1176, followed by 1.1205 that was a swing low in early April, 1.1230 that was a separator of ranges before the recent downfall, and 1.1285 that capped recently.