EUR/USD has been bearish and continues to be so this week. Let’s review the fundamental factors so far, look at where EUR/USD might find support, and get ready for Friday’s NFP.
This week, we got German inflation data, which was flat in December over November. Euro Area CPI came in at -0.2% year-over-year in December. Falling energy prices is the main reason, but even so, the overall inflation picture remains subdued and is a major reason the ECB continues to consider full-scale QE. ADP employment change for December came in at 241K, above the forecast of 227K, and above November’s 227K print which was revised up from 208K.
The combination of data should keep pressure on the EUR/USD, which has room to 1.1638, 2005-low. The NFP is due Friday and as long as price closes the week below 1.20, it remains bearish going into next week. if price gets to the 2005-lows, we should expect support since the monthly RSI is in oversold territory, and the trend seen in the monthly chart is sideways.
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