EUR/USD Forecast: Time is running out for a break above 1.0900
|- The US Dollar weakened after US data but then gained strength on the back of deteriorating market sentiment.
- The EUR/USD hit a fresh two-month high and then retreated, trimming most of its daily gains.
- The pair holds a bullish tone but continues to face strong resistance around 1.0900.
The EUR/USD hit a fresh two-month high on Thursday, just below 1.0900, and then retreated, erasing daily gains towards 1.0850. The pair remains in consolidation after recent gains but is unable to make another run higher. The US Dollar posted mixed results, weakened by lower yields.
Economic data from the US on Thursday came in below expectations. The weekly Jobless Claims report showed the worst numbers in months, indicating a softening labor market. The Industrial Production report for October also fell below market expectations, with a 0.6% contraction. The EUR/USD spiked after the data but the US Dollar quickly recovered ground.
The US 10-year Treasury yield pulled back from 4.50% to 4.44%, slightly above weekly lows. If Treasury yields continue to rise, the US Dollar will likely remain under pressure in the short term. However, the US economy is more robust than the Eurozone.
Eurostat will release the final reading of the October Consumer Price Index (CPI), which is expected to show no surprises. European Central Bank (ECB) President Christine Lagarde will speak at the Frankfurt European Banking Congress, but her words are unlikely to have a significant impact as the market expects the central bank to keep rates unchanged in the next meetings. In the US, Housing Starts and Building Permits are due.
EUR/USD short-term technical outlook
The daily chart shows the EUR/USD moving sideways between 1.0830 and 1.0890, holding firm onto recent gains and above the key Simple Moving Averages (SMAs). The bias remains towards the upside; however, the pair needs a clear break of 1.0900 to open the doors to further gains. A slide below 1.0790 would indicate an extension of the correction.
Ahead of the Asian session, the pair is exhibiting a bullish bias, with the price above the 20-SMA, which is located at 1.0820. Below that level, the pair would target 1.0800. On the upside, above 1.0900, the next resistance is at 1.0930. Technical indicators are starting to turn bearish.
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