EUR/USD Forecast: Cautious advance ahead of Fed speakers
|EUR/USD Current Price: 1.0823
- Back and forth around the US debt ceiling weighs on the market mood.
- European stocks trade with a sour tone, weighing on Wall Street's futures.
- EUR/USD stays above 1.0800 with limited upward strength.
The EUR/USD pair trades around 1.0820 amid easing demand for the US Dollar. The pair bottomed last Friday at 1.0759, a one-month low, picking up amid profit-taking ahead of the weekend. A sour market mood limited the advance, as, on the one hand, US Federal Reserve (Fed) Chairman Jerome Powell surprised investors with hawkish comments. On the other hand, United States (US) debt-ceiling talks unexpectedly stalled.
Fed's Powell said on Friday that inflation is far above the objective and that high inflation poses significant hardships, repeating that policymakers are "strongly committed" to return inflation to 2%. Also, GOP Garret Graves – who leads the Republican side in negotiations over the debt ceiling – reported that talks were paused, undermining the mood ahead of the weekly close.
Monday quick-started with cautious optimism, with Asian indexes advancing, following news US President Joe Biden and House Republican Speaker Kevin McCarthy are set to meet in Washington to resume debt-ceiling talks. Still, European indexes edged lower, dragging Wall Street's futures down, which reflects the dismal sentiment that usually backs the Greenback.
Data-wise, the Eurozone published March Construction Output, which fell by 2.4% MoM, worse than anticipated. The EU will publish the preliminary estimate of May Consumer Confidence after the US opening, while multiple Fed officials will be on the wires throughout the day. The Federal Open Market Committee (FOMC) Meeting Minutes will be released mid-week, and speculative interest will look for clues on what's next for monetary policy.
EUR/USD short-term technical outlook
The EUR/USD pair holds on to modest intraday gains with limited upward strength. Technical indicators in the daily chart remain within negative levels, having pared their recoveries and currently lacking directional strength. At the same time, the 20 Simple Moving Average (SMA) extends its slide far above the current level while the pair seesaws around a flat 100 SMA. The pair can gain downward traction once below 1.0790, and test a critical long-term support level at 1.0745, the 61.8% Fibonacci retracement of the 2022 yearly slump.
In the near term, the pair is technically neutral. EUR/USD recovered above a still bearish 20 SMA while it remains below the longer ones. The 100 SMA has crossed below the 200 SMA and gains downward traction, usually a sign of increasing selling interest. Finally, technical indicators approach their midlines from below but without enough strength to anticipate a bullish continuation in the upcoming hours.
Support levels: 1.0790 1.0745 1.0700
Resistance levels: 1.0850 1.0895 1.0940
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