EUR/USD: bearish forecasts

EUR/USD: bearish forecasts

2021-01-19 • Updated

What happened?

EUR/USD has started the week on the negative footing as

  • the market sentiment turned to risk-off amid vaccine delays and rising cases in Eurozone,
  • markets await the ECB meeting on Thursday, which is unsatisfied with too high EUR,
  • the EUR has a historical tendency to drop after US inaugurations,
  • and bearish technical signals.

Forecasts

Most analysts foresee that EUR/USD will inevitably dip to 1.2000 over the coming days. However, it should be just a short corrective pullback ahead the pair continues further rallying upwards. 

ING: “Wrapping up, ongoing Italian political uncertainty and a steadier dollar could briefly see EUR/$ trade 1.1980”.

Nordea Markets: “More often than not (9 out of 12 times), EUR/USD drops in the aftermath of a presidential inauguration. We are less gullible buyers of risk for now, but would consider using levels around 1.1950 in EUR/USD to go long again”.

Technical outlook

  1. The divergence between RSI and price may warn of the market reversal. When the new high of the price is not confirmed by the new high in the RSI, it’s a bearish divergence, which is a negative signal.
  2. The bearish divergence will be also confirmed if we look at the MACD indicator. Elsewhere, MACD has approached the zero line. Once it crosses it, it will be e bearish signal as well. 
  3. The key support area is 1.1950-1.2000. If the pair drops to this level, it shouldn’t fall further. The reverse to the upside will be expected. 

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