EUR/USD is Extremely Oversold but Without Signs of Bearish Exhaustion

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EUR/USD Current price: 1.1581

• A sharp drop in US equities exacerbated demand for the safe-haven dollar.
• US Treasury yields continue to consolidate holding near multi-month highs.
• EUR/USD is extremely oversold but without signs of bearish exhaustion.

The EUR/USD pair has extended its 2021 slump to 1.1562 its lowest since July 2020, holding nearby heading into Friday, Asian opening. The pair reached the mentioned daily low during US trading hours, following a sharp decline in US equities. The market mood remains sour amid inflation-related fears and supply chain disruptions affecting the global economic comeback.

On the data front, European figures fell short of the market’s expectations, affecting the shared currency. German inflation remained path in September according to preliminary estimates, below the 0.1% expected. The unemployment change in the country resulted at -30K, also missing the market’s expectations.

On the other hand, US data was mixed, as Initial Jobless Claims were once again up, printing at 363K in the week ended September 24. The Gross Domestic Product was confirmed at 6.7% in Q2, slightly better than anticipated. Finally, core Personal Consumption Expenditures prices met expectations with 6.1%.  

Germany will publish August Retail Sales on Friday, foreseen up 1.5% MoM, from -5.1% in July. Markit will publish the final version of its September Manufacturing PMIs for the EU and the US, while the latter will release the official September ISM Manufacturing PMI, foreseen at 59.6 from 59.9 in the previous month. Also, the EU  will publish the preliminary estimate of September inflation, while the US will unveil the core PCE inflation for August.

EUR/USD short-term technical outlook

The EUR/USD pair finished the day with sharp losses, falling for a fifth consecutive day. The daily chart shows that technical indicators maintain their sharp bearish slope, despite they are currently developing within oversold levels. The 20 SMA has accelerated its decline far above the current level while below the longer ones, reflecting increasing selling interest.

In the near term and according to the 4-hour chart, the bearish case persists, although technical indicators pared their slides, now consolidating in extreme oversold levels. Moving averages are heading firmly lower far above the current level, reflecting selling interest strength. Further declines could be expected on a break below 1.1560, although chances of a corrective advance have now increased.

Support levels: 1.1560 1.1520 1.1485

Resistance levels: 1.1640 1.1680 1.1725

Image Sourced from Pixabay

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.