EUR/USD – Downward pressure intensifies below the daily cloud, but bearish momentum may encounter resistance at the 200-day moving average (DMA) support
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EUR/USD fell to a new two-month low early Tuesday, weighed down by risk aversion following China’s latest stimulus measures and widespread expectations of a 25 basis point rate cut by the ECB on Thursday.
After closing below key levels at 1.0944/35 (the 61.8% Fibonacci retracement of the 1.0775/1.1214 range, daily cloud base, and 100-day moving average), bears are now targeting the 1.0880/73 area (76.4% Fibonacci retracement and 200-day moving average).
The daily chart shows a bearish technical outlook, with strong negative momentum and multiple bearish moving average crosses. However, momentum indicators are becoming overstretched, and the stochastic oscillator is entering oversold territory, which could slow down the current bearish momentum and make a break below the 200-day moving average more challenging.
As long as EUR/USD stays below the daily cloud base and the 100-day moving average, bears are likely to stay in control. A decisive break below 1.0880/73 would open the door to the early August low at 1.0781.
Today’s economic data showed declining inflation in Spain and France, while attention shifts to the German and EU ZEW economic sentiment reports. Forecasts for October are relatively optimistic (German ZEW at 10.2 vs. September’s 3.6; EU ZEW at 16.9 vs. September’s 9.3), which could help ease bearish pressure on the euro if the data meet or exceed expectations.
