The European single currency weakened since 2019 started as both geopolitical tensions between the US and China, and tensions rising between countries from the Euro Zone forced investors to look for safety in the US dollar.
With a Federal Reserve that managed to raise rates until December 2018 (giving room when the next economic downturn will come) and a US economy that had rebounded impressively following the 2008 financial crisis, the advantage is still on the largest economic power.
Price action squeeze – more pain ahead?
In terms of the EURUSD currency pair, the price action structure does not look good for the buyers. Trade.com forex trading, as well as activity from other brokerage companies, had pushed the price towards the 1.1120 key support area in what looks like a descending triangle formation.
From an order flow perspective, it means that sellers are willing to sell after each pullback (as we can see what happened when the price hit the falling trend line) and it could also suggest that a breakout below the support zone will happen in the near-term.
Alt text: EURUSD technical analysis
If that will materialize, the odds of the price continuing to slump towards 1.0500 support zone until the end of 2019 are high, considering that Europe is in a much worse economic condition than the US.
Slowing economic activity in Germany doubled by the conflict between the Italian extremist government and the EU + an uncertain Brexit outcome could continue to weigh heavily on the Euro price.
We can also see the EURUSD performance as a bearish parabolic structure, which at the present time point towards further losses. In order to negate the current bearish conditions, buyers will have a heavy task of driving the price above the daily 200 simple moving average. The price did not trade above it since May 2018, and we suspect any attempt by the buyers to break above the MA will be met with heavy selling orders.
With no sign of improvement both from an economic and political standpoint, the EURUSD is doomed to continue to edge, especially if we consider that the Federal Reserve already confirmed it will keep monetary policy unchanged in the near term. The most important sign of the bearish move continuing lower will be the breakout below 1.1120, which is what the sellers will need to watch very carefully.
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