Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0730.
- Add a stop-loss at 1.0850.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0800 and a take-profit at 1.0900.
- Add a stop-loss at 1.0700.
The euro continued its strong sell-off as traders embraced a risk-off sentiment. The EUR/USD price plunged to a low of 1.0782, its lowest level since November 14th. It has crashed by over 2.10% from its highest point on Friday.
Risk-off sentiment
Market participants maintained their risk-off sentiment in the overnight session. The US dollar index (DXY) rose from $102.46 on Friday to a high of $104.05, its highest point since November 2022.
At the same time, American equities dropped for two straight days. The Dow Jones and S&P 500 indices fell by 100 and 10 points, respectively. This is a sign that traders are concerned about the Federal Reserve.
In a statement, on Friday, Jerome Powell noted that it was too early to predict future interest rate cuts. He also warned that the bank would consider hiking rates if inflation remains stubbornly above its 2% target.
There are signs that the bank can still hike rates, helped by the strong economic numbers. According to the Institute of Supply Management (ISM), the non-manufacturing PMI increased from 51.8 in October to 52.7 in November. That increase was better than the expected 52.0.
The situation was different in Europe, where the services sector is still contracting. According to S&P Global, the Eurozone services PMI rose to 48.7 while the composite figure jumped to 47.6. While these numbers were an improvement from the previous month, they remain below the expansion zone of 50.
The EUR/USD pair will react to several important economic data from Europe and the US. Germany will publish the latest factory order numbers. In the US, ADP will release its estimate of nonfarm employment change data.
The ADP report will set the tone of what to expect on Friday when the US releases November’s non-farm payrolls (NFP) data.
EUR/USD technical analysis
The EUR/USD pair continued its downtrend and reached a low of 1.0780, its lowest point on November 14th. It has moved to the lower side of the Bollinger Bands. On the 4H chart, it has fallen below the 38.2% Fibonacci Retracement level.
Additionally, the Average Directional Index (ADX) has risen to over 40, signaling that the downtrend is strong. The Relative Strength Index (RSI) moved to the oversold level of 23. Therefore, the outlook for the pair is bearish as bears target the 50% retracement point at 1.0730.
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