EUR/USD Forecast: Test of 1.0745 on the cards
|EUR/USD Current Price: 1.0795
- Optimism boosts stock markets, but the US Dollar continues to strengthen.
- Upbeat United States macroeconomic figures weigh on EUR/USD.
- EUR/USD extends decline below 1.0800, aims to test a critical support level at 1.0745.
The EUR/USD pair remains under selling pressure, trading below the 1.0800 threshold. The Greenback retains its latest strength despite resurgent optimism, as United States (US) authorities are on their way to clinch a deal on extending the debt ceiling. Furthermore, easing concerns about the banking crisis underpin the mood. Bank stocks are up as US Western Alliance reported a rise in deposits, suggesting depositors’ flight receded. Global stock markets maintain the green on Thursday, reflecting the better sentiment, but things are different across the FX board as the US Dollar advances against most major rivals.
The European macroeconomic calendar had nothing relevant to offer, although European Central Bank (ECB) Vice President Luis de Guindos hit the wires, noting that “inflation in services is the most worrying for the ECB,” adding there is still scope to keep raising rates.
On the other hand, the US published Initial Jobless Claims for the week ended May 12, which increased by 242K, beating the 254K expected and decreasing from 264K in the previous week. Also, the May Philadelphia Fed Manufacturing Survey printed at -10.4, improving from -31.3 in April and better than the -19.8 anticipated by financial markets. The US Dollar ticked higher with the news. Later in the American session, the country will publish April Existing Home Sales.
EUR/USD short-term technical outlook
The EUR/USD pair pierced the 1.0800 threshold, and technical readings in the daily chart support a bearish extension in the upcoming sessions. The pair extends its decline below a firmly bearish 20 Simple Moving Average (SMA) while it is currently piercing a mildly bullish 100 SMA. At the same time, the Momentum indicator heads south at fresh two-month lows, while the Relative Strength Index (RSI) indicator hovers around 37, in line with another leg south.
The bearish case is also clear in the near term, as the 4-hour chart shows that technical indicators head south almost vertically without signs of downward exhaustion. In fact, the RSI is currently at 27, suggesting market participants are ready to test the 1.0745 support level, the 61.8% Fibonacci retracement of the 2022 yearly decline. Finally, the pair moves under all its moving averages, with the 20 SMA well below the longer ones and the 100 SMA aiming to cross below the 200 SMA.
Support levels: 1.0745 1.0700 1.0660
Resistance levels: 1.0815 1.0850 1.0895
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