EUR/USD accelerates decline below 1.1300
The EUR/USD exchange rate has been heavy this week. On Tuesday, it fell in the US and expanded in Asia. Now falls faster and reaches a few stops below 1.13. The US dollar sold in almost all directions and continued higher on Tuesday US time. The recent rise in the US dollar can be attributed to renewed concerns about the Chinese Evergrande and disproportionate sentiment in Asian indices following US-US trade news headlines. Chinese media previously reported that online sales platform Evergrande had closed some departments, further exacerbating the risk of default. Meanwhile, U.S. Commerce Secretary Gina Raimondo said
China is not keeping up with its Phase 1 trade deal.
Additionally, the dollar is still supported by strong US retail sales data, which has reinforced expectations of Fed tightening, pushing Treasury yields up the curve. U.S. retail sales increased for the third straight month in October, up 1.7% year-over-year. 1.4% is expected.
Currently, market participants don’t know how much, in a few months, politicians may worry about inflation. Central bankers are lagging behind the curve and appear unpredictable in monetary policy consistently over time. Hedging is a logical consequence, which again increases demand for high-yielding assets like the dollar that are ready to continue the rally.
Meanwhile, macroeconomic data reflected global uncertainty. A survey of Germany’s ZEW found a sharp drop in ratings on the current situation in November, but an improvement in economic sentiment. The country’s inflation was confirmed at 4.6% y/y in October and the wholesale price index jumped to 15.2% y/y. In October, the lowest level since November 2011, Richard Curtin, chief economist for the Surveys of Consumers, said: “Consumer confidence that inflation and effective policies to mitigate its impact has not yet been developed,” said Richard Curtin. “In early November, consumer sentiment fell to the lowest level in ten years.”.
The forthcoming macroeconomic calendar includes the second release of EU third-quarter gross domestic product (GDP) data (not expected to change to 2.2%) and US retail sales for October, scheduled for Tuesday. The union will release the final inflation data for October on Thursday when the US releases its regular weekly jobless claims data.
EUR/USD is trading at levels last seen in July 2020 and will continue to decline. The technical data on the weekly chart showed increased bearish potential. The pair fell below the 200 SMA after fighting for more than a month before accelerating south. The 20 SMA confidently headed south rather than longer, reflecting growing buying interest. At the same time, technical indicators suggest that the thrust remains at an uneven negative level, but still lowers the other leg. The daily chart suggests a correction rally is imminent. The momentum indicator improved slightly while the RSI lost its bearish strength and stabilized at 34. However, the bearish trend remains stable as all moving averages hold a bearish slope much higher than the current level.
Immediate support will break below the 1.1400 threshold and test the 1.1330 price point. Another bearish extension exposes the 1.1260 level and long-term static support. A correction rally, on the other hand, may reach the 1.1520 area first and then the 1.1610 area later. Sellers are more likely to defend the latter.