EUR/USD Forecast: Euro shows no signs of a recovery

Following a modest recovery attempt in the late American session on Tuesday, EUR/USD failed to gather momentum on Wednesday and retreated below 1.1000. The Technical outlook suggests that sellers retain control ahead of the private sector employment data later in the day.

The disappointing data releases from the US, which showed that the business activity in the manufacturing sector continued to contract in July and job openings declined more than expected in June, caused the US Dollar to lose its strength late Tuesday.

Meanwhile, global rating agency Fitch announced that it downgraded the US government's credit rating to AA+ from AAA, citing anticipated fiscal deterioration over the next three years and a high and growing general government debt burden. US stock index futures are down between 0.7% and 1.3% following this development, reflecting the risk-averse market atmosphere.

In case safe-haven flows continue to dominate the financial markets after Wall Street's opening bell, EUR/USD could find it difficult to stage a rebound.

Market participants will also pay close attention to the ADP Employment Change data, which is forecast to arrive at 189,000 in July, down sharply from 497,000 in June. In case private sector employment in the US rises less than expected, the USD could lose strength. Unless the risk sentiment improves, however, the USD's losses could remain limited.

EUR/USD trades below the 1.1000/1.1010 area, where the Fibonacci 61.8% retracement of the latest downtrend and the 200-period Simple Moving Average (SMA) on the 4-hour chart form strong resistance. Additionally, the Relative Strength Index (RSI) indicator on the same chart stays below 50, highlighting the lack of buyer interest.

In case the pair makes a 4-hour close below 1.0980 (upper-limit of the descending regression channel), next bearish targets could be set at 1.0950 (static level, mid-point of the descending channel) and 1.0900 (psychological level, static level, lower-limit of the descending channel).

On the upside, resistances align at 1.1050 (Fibonacci 50% retracement of the latest uptrend, 50-period SMA) and 1.1100 (Fibonacci 38.2% retracement, 100-period SMA), if EUR/USD manages to flip 1.1000/1.1010 back into support.

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