EUR/USD Daily Forecast – Euro Continues to Breakdown

Assessing the Technical Break in EUR/USD

Price action in EUR/USD has certainly been interesting over the last year or so. The pair looked like it was about to break down around the middle of August last year, but instead, it recovered higher.

It then did the same thing several times over the last year. This type of price action often throws off momentum traders as they typically tend to position quite late and inevitably get stopped out in range conditions.

It’s hard to make the “this time it’s different” argument, but there is certainly enough compelling evidence that it just might be. For starters, EUR/USD has been in oversold conditions for several days now. In a range environment that would signal the potential for a pullback. However, in a technical break, currency pairs tend to fall into oversold territory and then pretty much stay there.

Euro is not Just Under Performing Against the Dollar

A strong bearish case for the euro can also be made by looking at exchange rates of other popular currencies. Take the Australian and New Zealand dollar for example. EUR/AUD has fallen below support on a 4-hour chart to post a succession of lower highs and lower lows, often a signal of a bearish trend change. EUR/NZD has fallen below a rising trendline that had held it higher for the second half of August.

The loonie has been performing a bit better than the other commodity currencies. As a result, EUR/CAD is on the verge of breaking to a one-year low. The euro is also against notable lows against the Swiss franc and Japanese yen. The exception is the British pound which has been weighed by ongoing Brexit concerns.

Considering that the euro is declining broadly against most of its bearish counterparts, I don’t think it makes sense to try and look for a pullback towards median levels which would have been a profitable way to trade EUR/USD over the past year or so.

Technical Analysis

Rather than a pullback to the median point, I expect that recovery attempts in EUR/USD will shallow and met with sellers. In the session ahead, I see resistance at 1.0979. To the downside, the next area where we might see a bounce comes in at 1.0911.

Bottom Line

• The pattern in EUR/USD seems to have shifted. A lack of buying in the current decline suggests the pair is in a technical breakdown.
• It would take a sustained break above 1.1050 to negate the current technical break.