EUR/USD Forecast: Euro could retreat toward 1.0620 unless risk mood improves
|- EUR/USD fell sharply and broke below 1.0700 late Thursday.
- The USD stays resilient following Fed Chairman Powell's hawkish remarks.
- The pair could stay on the back foot in case markets remain cautious ahead of the weekend.
EUR/USD came under bearish pressure and declined below 1.0700 in the late American session on Thursday. The pair stays relatively quiet early Friday, while the technical outlook points to a slightly bearish bias.
While participating at a monetary policy panel organized by the International Monetary Fund on Thursday, Federal Reserve Chairman Jerome Powell reiterated the data-dependent approach. "We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation," Powell stated.
Powell, however, noted that they are not confident that they have achieved a 'sufficiently restrictive' policy stance to bring inflation down to 2% over time. This comment provided a boost to the US Dollar (USD) and caused EUR/USD to turn south.
Euro price this week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.53% | 1.17% | 1.03% | 2.36% | 1.24% | 1.67% | 0.42% | |
| EUR | -0.53% | 0.65% | 0.51% | 1.85% | 0.73% | 1.14% | -0.11% | |
| GBP | -1.19% | -0.65% | -0.14% | 1.21% | 0.08% | 0.49% | -0.76% | |
| CAD | -1.04% | -0.52% | 0.15% | 1.34% | 0.22% | 0.63% | -0.62% | |
| AUD | -2.42% | -1.88% | -1.22% | -1.37% | -1.15% | -0.71% | -1.98% | |
| JPY | -1.26% | -0.72% | -0.29% | -0.20% | 1.14% | 0.43% | -0.83% | |
| NZD | -1.68% | -1.14% | -0.48% | -0.63% | 0.72% | -0.42% | -1.25% | |
| CHF | -0.43% | 0.11% | 0.75% | 0.61% | 1.96% | 0.84% | 1.25% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Nevertheless, the CME Group FedWatch Tool shows that markets are still pricing in a 90% probability of the Fed leaving the policy rate unchanged in December. The market positioning suggests that there is more room for USD strength if other policymakers adopt a similar language
The Euro Stoxx 50 Index opened in negative territory on Friday, reflecting a cautious market stance. Meanwhile, US stock index futures were last seen rising between 0.1% and 0.3%. In case Wall Street's main indexes rebound following Thursday's decline, the USD could struggle to continue to outperform its rivals. On the other hand, a negative shift in risk sentiment could weigh on EUR/USD ahead of the weekend.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart retreated below 50, while EUR/USD declined below the mid-point of the ascending regression channel, pointing to a bearish tilt in the short-term outlook.
If EUR/USD fails to stabilize above 1.0680 (mid-point of the ascending channel), sellers could remain interested. In this scenario, the 50-period Simple Moving Average (SMA) aligns as interim support at 1.0660 ahead of 1.0640 (Fibonacci 38.2% retracement level of the latest downtrend) and 1.0620 (lower limit of the ascending channel, 100-period SMA).
On the upside, resistances are located at 1.0700 (Fibonacci 50% retracement), 1.0730 (upper limit of the ascending channel) and 1.0750 (Fibonacci 61.8% retracement).
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