EUR/USD Forecast: US Dollar backed by risk aversion
|EUR/USD Current Price: 1.0701
- US inflation fueled demand for safety ahead of Retail Sales figures.
- European data came in worse than anticipated, weighing on the Euro.
- EUR/USD gains bearish strength but the battle around 1.0700 continues.
The EUR/USD pair is under mild pressure on Wednesday, trading around the 1.0700 figure. Surprisingly, the Euro holds ground despite broad US Dollar strength following the release of US inflation figures on Tuesday. The United States Consumer Price Index rose at an annualized pace of 6.4% in January, easing modestly from the previous 6.5% while missing the 6.2% expected.
Markets were quite volatile afterwards, as investors are still looking for a potential pivot in the US Federal Reserve monetary policy, despite data and policymakers pointing against it. Stocks gave up to evidence the American central bank will continue to tighten, ending the day in the red and backing US Dollar demand.
The risk-averse mood extended through the Asian session, partially easing in Europe. Across the board, the Greenback continues to strengthen, with the Euro indifferent to softer-than-anticipated Euro Zone figures. Industrial Production fell in December by 1.7% YoY, worse than the 0.7% decline forecasted, while the seasonally adjusted Trade Balance in the same month posted a deficit of €18.1 billion.
The focus now falls on US Retail Sales, which are seen up 1.8% in January. The country will also publish the February NY Empire State Manufacturing Index and January Industrial Production and Capacity Utilization.
EUR/USD short-term technical outlook
The EUR/USD pair pressures its daily low, with the weekly one at 1.0655 being the immediate support level. Technical readings in the daily chart skew the risk to the downside, as the pair slides below a mildly bearish 20 Simple Moving Average (SMA). Technical indicators, in the meantime, maintain the downward pressure within negative levels. Finally, the 100 SMA advances above a flat 200 SMA, both far below the current level.
In the near term, and according to the 4-hour chart, the pair has room to extend its decline. It is crossing below a mildly bearish 20 SMA, while the longer ones lack directional strength above it. At the same time, technical indicators turned lower, with the Momentum within neutral levels and the RSI currently at 43.
Support levels: 1.0655 1.0620 1.0570
Resistance levels: 1.0745 1.0790 1.0830
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