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EUR/USD Forex Technical Analysis – Major Downside Targets Emerge on Charts at 1.0879 and 1.0838

Friday’s sell-off was all about downside momentum so trader reaction to its low at 1.0942 will determine the direction of the EUR/USD on Monday.
James Hyerczyk

The Euro plunged on Friday, hitting its lowest level since October after German industrial output recorded it biggest decline in a decade in December and a recent collection of strong U.S. employment data encouraged investors to buy the greenback.

German industrial output suffered its biggest fall in December since the recession-hit year of 2009, a shock drop highlighting the weakness in manufacturing that risks dragging Europe’s largest economy into contraction again, according to Reuters.

Industrial production tumbled by 3.5% on the month, undershooting expectations for a 0.2% fall, Statistics Office data showed. That was the biggest drop since January 2009 and came after an upwardly revised 1.2% increase in November.

In the U.S., non-farm payrolls data for January came in above analysts’ expectations, bolstering the view that the economy continues to grow at a healthy pace, Reuters wrote.

The U.S. economy added 225,000 jobs last month with employment at construction sites increasing by the most in a year amid milder-than-normal temperatures, data from the Labor Department showed. Economists polled by Reuters had forecast payrolls would rise by 160,000 jobs in January.

On Friday, the EUR/USD settled at 1.0944, down 0.0037 or -0.34%.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed last week when sellers took out the January 29 main bottom at 1.0992 and the November 29, 2019 main bottom at 1.0981. The next two downside targets are 1.0879 and 1.0838. The main trend will change to up on a move through 1.1095.


Daily Swing Chart Technical Forecast

Friday’s sell-off was all about downside momentum so trader reaction to its low at 1.0942 will determine the direction of the EUR/USD on Monday.

Bearish Scenario

A sustained move under 1.0942 will indicate the selling pressure is getting stronger. If the EUR/USD continues to generate downside momentum over the near-term then look for the selling to possibly extend into the October 1, 2019 main bottom at 1.0879 and the May 11, 2017 main bottom at 1.0838.

Bullish Scenario

Holding above 1.0942, or trading through this level then recovering Friday’s close at 1.0944 will signal the presence of buyers. This will put the EUR/USD in a position to form a closing price reversal bottom. If confirmed, this could trigger a near-term short-covering rally, but not necessarily lead to a change in trend.

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