Since 12th January 2018 EUR/USD has been trading within the interval of 1.2150 and 1.2550. Since mid February it has narrowed further down from the top to 1.2480. I find the EUR/USD to be at a very interesting point at the moment. Currently this pair is fluctuating around 1.22 level and further depreciation below the recent low at 1.2150 could entail a stronger downward movement and euro selloff.
Last week EUR/USD rose to 1.2415 mid week just to drop steeply afterwards. This week the pair has continued it's rather strong depreciation by breaking resistance at 1.2220, low from April 6th, and is nearing the low of March 1st at 1.2150.
On the 4 hour graph we could distinuish the 5 Elliot wave movement from 1.2400 to 1.2180. Afterwards we saw some retracement to around 1.2240 what lead to the break of the most recent downward trend line on the 4 hour graph. I consider the current point to be crucial in the EUR/USD determing furhter direction. Further depreciation will confirm the downward trend. However a move back up and moving away from the lower bounderies of the current canal (visible on 1 day graph) may indicate further consolidation within the previous intervals of the canal.
In my opinion technical analysis of EUR/USD doesn't give us a clear answer. The recent strong selloff of the Euro indicates it's weakness, but the break of the downward trend line and moving away from the resistance at 1.2150 pinpoints a potential turnaround. Thus, I think in determining it's direction we should foremost take into account the fundamentals.

In the Euro Zone the ZEW Economic Sentiment index dropped to 1.9. It is the worst reading since November 2012 as well except for one reading in 2016. This shows very negative economic 6 month outlook among analytics and institutional investors. Reasons behind this we may see in trade interventionism between China-USA and the uncertain aftermath on the Eurozone, uncertainty in trade with the UK due to undergoing Brexit negotiations and escalation of the situation in Syria. But looking inwards the situation isn’t that bright either. Euro Zone trade balance surplus came back to a reasonable level in Ferbruary this year reaching 18.9 billion, but in January it was only a mere 3.5 billion. The level of exports was similar in both months at just under 180 billion. In April we have seen a drop in Manufacturing PMI to 56.0 from 56.6 a month earlier and from well over 58.0 in the 6 consecutive months before that. However Services PMI in April edged up a bit to 55.0 from 54.9 in March, but that was still way lower from levels seen in the 4 consecutive months before that, over 56 with January reading reaching 58. Retail sales have disappointed during holiday season with December MoM reading at -1.0% and this year they have not picked up by much with readings coming in for the first 2 months at -0.3% and 0.1%. However on a YoY basis it does not look that pessimistic as for the first 2 months retail sales actually grew by 1.5% and 1.8%. In the first quarter 2018 we have seen substantial slowdown in German exports and retail sales. In February German exports have dropped by 3.2%. April reading of German ZEW Economic Sentiment index showed a large drop of 13.3 points down to a level of -8.2, this was the worst reading since November 2012 when the Euro Zone was in the middle of the financial crisis. German Business Expectations, Current Assessment and Ifo Business Climate all came in lower than forecasts in April at 98.7, 105.7 and 102.1 respectively. German Trade Balance this year showed very little surplus at levels of 17.3 billion in January and 18.4 in February. Today the German government has lower GDP growth forecast for 2018 from 2.4% to 2.3% and further forecasts and explanations will follow tomorrow.

Concluding, the technical analysis of EUR/USD pair is very ambigious at the moment. However, it's upcoming movements may be crucial in determing it's direction. Thus, we may try to get an early positon in the market by evaluating the fundamentals. As we go into this year economic data from the Euro Zone and especially from the biggest economy, Germany, has been more and more pesimistic. We can not call it a slowdown as some lower readings may only temporarily be worse off, but the most disturbing fact is the much lower expectations and sentiment among observers and participants of the economy.

Therefore, my forecast for the EUR/USD pair is BEARISH. I think the current global political uncertainty, hinderance to trade in various markets and much lower economic expectations and sentiment will outweigh any even positive one-off data readings. I think the break of resistance at 1.2150 is inevitable.
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