Euro Loses Its Allure

Euro Loses Its Allure

Ekaterina Seredinskaya  | Feb 08, 2019 14:02

The euro failed to receive a respite after a recent sell-off and remains under pressure on Friday.

EUR/USD has settled around 1.1340, trading with a mild bearish bias. In the weekly charts, the pair is within striking distance from the 200-week MA. This region capped the selling pressure on several occasions over the last few months, so a closure below this moving average will worsen the technical picture significantly.

The sentiment around the common currency continues to deteriorate. In its fresh forecasts, the the European Commission revised lower its prospects of economic growth for 2019 in Germany and the region in general to 1.1% from 1.8% and to 1.3% from 1.9%, respectively. Moreover, the Commission now expects inflation at 1.4% versus the previous estimate of 1.8%.

Against this backdrop and the latest disappointing macroeconomic data from the euro area, investors push back the ECB rate hike expectations further. If the central bank itself starts signalling a possible shift in its forward guidance, the prospects of shelving plans to hike rates in 2019 will hurt the euro quite dramatically.

Technically, EUR/USD needs to stay above the 200-week MA that is standing on the way to the 1.290 region, where January 24 lows lie. Should the 1.13 support withstand the pressure from the dollar bulls, the common currency could make some recovery attempts. However, the fundamental picture in the region coupled with trade war worries will prevent the high-yielding currency from a decent rebound in the short term.

Ekaterina Seredinskaya

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