EUR/USD Daily Forecast – Euro Extends Losses After Break of Major Support

Reversal Pattern Fails to Elicit Buyers

A bullish reversal pattern on the EUR/USD weekly chart has not phased bears as the pair sold off this week after breaking down from a range.

EUR/USD posted a bullish morning star pattern as a result of a rally last week. However, major support at 1.1118 has not been respected which suggests that bears are in control. The level is considered significant as it has held several declines this year aside from a brief dip below it in late July.

Economic data out of the US came in ahead of expectations on Thursday which boosted the greenback. Retail sales rose by 0.7% in July, beating the analyst call for a rise of 0.3%. Excluding auto and gas, the figure rose 1.0%.

Eurostat will release trade balance figures in the session ahead. From the United States, building permits and the University of Michigan’s consumer sentiment gauge will be reported. None of these releases typically have a sustained impact on the exchange rate.

Technical Analysis

As mentioned above, an import level has broken in EUR/USD and there does not seem to be much sign of buying. At the same time, the pair is starting to enter oversold territory on a 4-hour chart.

Support in the session ahead is found at 1.1075 which marks the lowest daily close for the year thus far. Beyond that, the next level of interest comes in at 1.1027 which marks the August low.

Considering the light economic calendar, it doesn’t seem likely that the pair will attempt to break to fresh yearly lows today.

Today’s close will be important. If the pair holds near current levels, it will reverse the bullish implications of last weeks reversal pattern. Essentially, it will confirm that EUR/USD has resumed in its broader downtrend.

Bottom line

• The momentum in EUR/USD is to the downside, although the pair is starting to become oversold on a 4-hour time frame.
• The single currency is on pace to post the largest loss among the major currencies.
• The economic calendar is light in the session ahead. However, headlines can still create some volatility.