EUR/USD Forecast: Bears to Pounce 1.13 amid Risk-off, Eying ECB

• On Monday, EUR/USD returns to the 1.1300 area.
• The dollar remains strong despite continuing risk aversion.
• The US 10-year yield is trading defensively near 1.90%.

The EUR/USD price forecast remains broadly bearish after breaking the 1.1400 level. It is attributed to the risk-off sentiment that strengthens the USD. The EUR/USD price continues to lose ground on Monday morning in Europe, testing the 1.1300 support line.

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EUR/USD is influenced by geopolitics and risk aversion. Following the release of US inflation data for January (10th February), the EUR/USD has declined for a second straight session and continues to bounce off last week’s highs.

A major driver of the pair’s price action continues to be the short end of the US and German cash markets, especially after the recent FOMC and ECB meetings. Germany’s 10-year yield continues to correct lower from recent highs while widening the spread gap against its US counterpart, which remains another weakness for the pair.

Chairperson Lagarde’s later speech will attract some attention on the old continent, but there are no upcoming events on either side of the Atlantic.

In the wake of US consumer price hikes, EUR/USD failed to withstand the 1.1500 level, leading to a correction towards the 1.1300 limits in response to a renewed and fairly strong bias to the US dollar. However, in spite of sustained gains, the pair’s improving prospects appear to be supported by renewed speculation of a potential ECB rate hike sometime later in the year, higher yields in Germany, persistently high inflation, and a reasonable pace of economic growth in other key indicators in the region.

The following major Eurozone events will take place this week: ECB Lagarde (Monday), ZEW Economic Sentiment (Tuesday), EMU Industrial Production (Wednesday), and EMU Consumer Confidence Express (Friday).

EUR/USD price technical forecast: Bears crack 200-SMA

The EUR/USD price has been floating near the intraday lows of the 1.1300 area. This is a very crucial support that might break if the bears continue to push hard. The 200-period SMA on the 4-hour chart has been broken too. All the key SMAs are sloping down, the point at further losses. The average daily range is 80% higher than the usual during the early European session.

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The volume data supports the bears for now. Any move below 1.1300 will lead towards 1.1260 ahead of 1.1200. Alternatively, the upside correction may seem limited, around 1.1330 ahead of 1.1375 and 1.1400.

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