EUR/USD Forecast: Fresh Lows, More to Come

EUR/USD Forecast: Fresh Lows, More to Come

18 May 2016, 12:09
Roberto Jacobs

EUR/USD Forecast: Fresh Lows, More to Come

The EUR/USD pair plummeted to a fresh three-week low of 1.1255, on the back of poor EU inflation data. In April 2016, EU annual inflation fell 0.2%, whilst monthly basis, inflation remained flat at 0.0%. The common currency was already under pressure ahead of the release, and actually bounced modestly from the mentioned low at the time being, as investors are waiting for the FOMC Minutes, to be released in the American afternoon.


Majors have been quite choppy this month, as uncertainty over the upcoming rate hike in the US kept rising. In one hand, data has been far from encouraging, yet at the same time, US policy makers keep repeating that two rate hikes this year are still on the table. Anyway, Minutes can offer a clearer picture on the matter, but don't put too much on that.

In the meantime, the EUR/USD pair 4 hours chart, shows that the 20 SMA has accelerated its decline well above the current level, and while the RSI is losing downward strength near oversold territory, but is far from indicating a recovery, maintaining the risk towards the downside. The 1.1280/90 region is  now the immediate resistance, with gains above it favoring an advance up to 1.1330 first, and to 1.1370 later, should the FED offer a dovish tone.

A break below the daily low on the other hand, can see the pair approaching 1.1200, whilst below the psychological support, the decline can extend down to 1.1160.


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