EUR/USD Forecast: Are we done with record lows?

Valeria Bednarik FXStreet

EUR/USD Current Price: 0.9673

Risk aversion amid concerns about a global economic downturn leads financial boards.
The German IFO survey showed that Business Climate contracted further in September.
EUR/USD bearish momentum intact in the long term, lower lows still likely.

The dollar soared at the weekly opening, resulting in EUR/USD plummeting to a fresh multi-year low of 0.9549, bouncing afterward to recover the 0.9600 threshold. The pair topped at 0.9700 in early Asia and now trades at around 0.9670.

The greenback extended its Friday momentum amid prevalent risk aversion. Concerns about a steepening global economic downturn keep pushing the USD higher, particularly after last week's events. Several central banks, including the US Federal Reserve, tightened their monetary policies amid stubbornly high inflation. Additionally, most policymakers downwardly reviewed their growth expectations.

In the meantime, Europe deals with soaring energy prices amid the Russian war, while US government bond yields run to fresh multi-year highs. Asian and European indexes trade in the red, hinting at a soft start on Wall Street.

Further hurting the EUR, Germany published September IFO Business Climate, which contracted more than anticipated, down to 84.3 from 88.5. Expectations also plummeted, down to 75.2 from 80.5. The US will publish the September Dallas Fed Manufacturing PMI, while European Central Bank President Christine Lagarde will offer a speech early in the US session.

EUR/USD short-term technical outlook

The EUR/USD pair trimmed early losses but holds below Friday’s close at 0.9689, which means the risk remains skewed to the downside. Technical readings in the daily chart show modest signs of downward exhaustion, as technical indicators are losing their bearish strength well into negative levels. Nevertheless, the pair keeps trading below bearish moving averages, with the 20 SMA currently at around 0.9950.

In the near term, and according to the 4-hour chart, bears are also in control. Technical indicators resumed their declines below their midlines after correcting extreme oversold conditions. At the same time, the 20 SMA accelerated its slide below the longer ones, maintaining a vertical slope at around 0.9780. A steadier bullish correction can take place if the pair clears the latter. Renewed selling interest below the mentioned daily low, on the other hand, should lead to a steadier decline, with market players eyeing the 0.9000 figure.

Support levels: 0.9620 0.9585 0.9550

Resistance levels: 0.9690 0.9730 0.9780

View Live Chart for the EUR/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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