Bears retake control amid exacerbated risk factors

EUR/USD Current Price: 1.0525

  • European countries are discussing a potential full embargo on Russian oil.
  • Global indexes are on the back foot amid fears about slowing economic growth.
  • EUR/USD is on the verge of a bearish breakout, with fresh multi-year lows in sight.

The American dollar started the week with a better footing, recovering most of the ground shed on Friday. The EUR/USD pair consolidates a few pips above the 1.0500 figure ahead of the US open after a mixed batch of EU data. German Retail Sales were down 0.1% in March, while the April EU Sentiment Economic Indicator printed at 105, missing the 108 expected and below the previous 106.7. Finally, the final readings of the April S&P Global Manufacturing PMIs were upwardly revised. The German index was confirmed at 54.6, while that for the EU printed at 55.5.

Meanwhile, stocks are down in Europe as the focus remains on tensions surrounding the relationship with Russia. The German Economy Minister Robert Habeck noted that there is still no unity among EU member states on an oil embargo on Russia, although Finance Minister Christian Lindner added that it is still possible. At the same time, European Central Bank vice-president Luis de Guindos said that a rate hike in July is possible, although unlikely. None is positive news for the shared currency, which may accelerate its slump and reach fresh multi-year lows this week.

The US session will bring the April S&P Global Manufacturing PMI alongside the official ISM report for the same month. The latter is foreseen at 57.7, up from 53.8 in the previous month. At the time being, Wall Street trades dip in the red, reflecting the dismal market mood, and it seems unlikely that upbeat US figures may be enough to change the market’s bias.

EUR/USD short-term technical outlook

The EUR/USD pair is down from an intraday high of 1.0567, and the daily chart shows that the risk remains skewed to the downside. The 20 SMA heads firmly lower, far above the current level, while the longer ones maintain their bearish slopes above the shorter one. Technical indicators have recovered modestly but remain within oversold levels without signs that could confirm an interim bottom.

According to the 4-hour chart, the risk is also on the downside. The pair is unable to break above a bearish 20 SMA, which currently stands a few pips above the current level. The Momentum indicator is struggling to reenter positive territory while the RSI indicator consolidates around 37, indicating absent buying interest. Bears are likely to resume acting on a break below the 1.0500 level, with the ultimate bearish target at 1.0339, the January 2017 monthly low.

Support levels: 1.0500 1.0460 1.0415

Resistance levels: 1.0560 1.0605 1.0650

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