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EUR/USD Daily Forecast- Bearish While Below 1.10

By:
Jignesh Davda
Updated: Sep 24, 2019, 08:59 UTC

EUR/USD fell for a second consecutive session on Monday and bears are selling rallies to the 1.1000 level in early trading on Tuesday to maintain a bearish tone.

EUR/USD

Draghi Repeats Call for Fiscal Stimulus

In a speech on Monday, ECB President Mario Draghi said the economy is not showing any signs of rebounding and advocated for fiscal stimulus.

Draghi commented that the ECB should look into Modern Monetary Theory (MMT) which uses fiscal stimulus to achieve full employment and deals with upward inflationary pressures by raising taxes and issuing bonds.

This is in line with his views following the recent ECB meeting where policymakers lowered the interest rate and introduced fresh quantitative easing. Draghi emphasized in the press conference that monetary policy alone will not suffice and that fiscal stimulus is needed.

Draghi’s concerns followed data that showed manufacturing activity in the Eurozone contracting at its fastest pace in nearly seven years. The ECB President commented that persistent weakness in this sector stands to put other sectors of the economy at risk.

Earlier today, Germany’s IFO business climate index increased slightly to 94.6 which was a ticker higher than the analyst estimate. However, the positive data failed to have much of an impact on the exchange rate. Later in the North American session, US consumer confidence figures will be released. This release can trigger a bit of volatility in the exchange rate.

Technical Analysis

EUR/USD has been consolidating below the psychological 1.1000 handle since around the end of European trading on Monday. A range has formed just below the important price point as bears have been defending it.

EURUSD Hourly Chart

I think this is an area where we could see the pair once again turn lower for a run at the 1.0900 level. A range break is required for confirmation. This means a drop below roughly 1.0980.

On the other hand, if the pair gets back above 1.1000, I think there is some potential for a retest of the early week high around 1.1025.

Bottom Line

  • EUR/USD has fallen into a range after recovering towards the 1.10 handle.
  • The pair continues to signal more downside.
  • A break above 1.10 could trigger a rally towards the weekly high around 1.1025.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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