EUR/USD Forecast: Recovering within range, dollar still strong
|EUR/USD Current Price: 1.0530
- ECB Meeting Minutes showed concerns about inflation and flexibility in monetary policy.
- US stocks are attempting a shy recovery after Wednesday’s sell-off.
- EUR/USD is technically bullish in the near term but needs to break through 1.0575.
The EUR/USD pair trades with modest gains on Thursday, heading into the US open at around 1.0530. The pair started the day on the back foot, falling to 1.0459 amid a risk-off mood. Following Wall Street’s collapse on Wednesday, Asian and European indexes also fell, although the bleeding halted mid-London session, with stocks attempting to recover some ground.
The main reasons behind the poor market sentiment remain the same. On the one hand, skyrocketing inflation weighs on economic growth. On the other, mounting tensions between Europe and Russia also affecting economic progress. Finally, central banks’ aggressiveness to tame inflation, which seems to be too little and too late.
Demand for safety has boosted the greenback, now giving up some of its recent gains but still strong. For a change, the dollar is down against safe-haven rivals, another sign of fear.
Meanwhile, the European Central Bank published the Minutes of its latest meeting. The document showed that policymakers are concerned about inflation, quite obvious at the time being and triggering no market reaction. Members agreed that even relatively small steps might be sufficient to turn the current accommodative monetary policy stance into a restrictive stance, leaving the door open for a timely rate hike “if conditions warrant it.”
Data wise, Construction Output in the EU remained pat in March but was up 3.3% YoY. The US published Initial Jobless Claims for the week ended May 13, which increased to 218K, worse than the 200K expected, and the Philadelphia Fed Manufacturing Survey, down to 2.6 from 17.6 in the previous month.
EUR/USD short-term technical outlook
The EUR/USD pair trades at the upper end of its weekly range, with limited bullish potential. The daily chart shows that it is meeting sellers around a firmly bearish 20 SMA for a third consecutive day, while the longer ones remain far above the latter. The Momentum indicator consolidates around its midline while the RSI heads modestly higher within negative levels, failing to confirm buying strength.
EUR/USD is mildly bullish according to the 4-hour chart. Technical indicators advance within positive levels, although they are currently below their weekly highs. At the same time, the pair advanced beyond a bearish 100 SMA after meeting buyers around a bullish 20 SMA. An upward continuation seems more likely once the pair overcomes 1.0575, the immediate resistance level.
Support levels: 1.0510 1.0470 1.0430
Resistance levels: 1.0575 1.0620 1.0660
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