EUR/USD Analysis: Confined in a familiar range; resilient below 1.0800 mark

  • Mostly in line Eurozone macro data assisted EUR/USD to gain some traction on Friday.
  • Awful US Retail Sales data undermined the dollar and remained supportive of the uptick.
  • Worsening US-China relations capped the upside and held the pair in a familiar range.

The EUR/USD pair continued with its two-way price action on Friday, albeit remained confined well within a familiar trading range held over the past 1-1/2 week or so. The pair continued showing some resilience below the 1.0800 round-figure mark and gained some positive traction following the release mostly in line prelim German/Eurozone GDP reports. Data released on Friday showed that the German economy contracted by 2.2% and the broader Eurozone contracted by 3.8% during the January-March quarter.

From the US, the monthly retail sales missed consensus estimates by a big margin and plunged 16.4in April. The US dollar turned lower in reaction to the awful macro data and provided an additional boost to the major. However, fears about the second wave of coronavirus infections, along with worsening US-China relations continued lending some support to the greenback's relative safe-haven status and capped any meaningful upside for the pair. In the latest development, the US Commerce Department announced to bar Huawei from acquiring semiconductors and chipsets made using US software and technology.

The pair retreated around 30 pips from daily swing lows, though managed to regain some positive traction on the first day of a new trading week. The easing of lockdown restrictions in some parts of the world fueled hopes a recover in the global economy and boosted investors' confidence. This, in turn, undermined the USD and was seen as a key factor lending some support to the major. In the absence of any major market-moving economic releases, either from the Eurozone or the US, the pair remains at the mercy of the broader market risk sentiment and the USD price dynamics.

Short-term technical outlook

From a technical perspective, the recent range-bound trading action warrants some caution before placing any aggressive directional bets. Bears are likely to wait for a convincing break below the 1.0775 horizontal support to confirm any further near-term depreciating move towards the 1.0700 round-figure mark. Some follow-through selling now seems to turn the pair vulnerable to slide further to retest YTD lows, around the 1.0635 region.

On the flip side, the 1.0850 region might continue to act as an immediate resistance, above which the pair is likely to make a fresh attempt towards reclaiming the 1.0900 mark. A sustained strength beyond the mentioned hurdle might prompt a near-term short-covering move and should assist the pair to accelerate the move up towards the 1.0980 supply zone en-route the key 1.1000 psychological mark and the very important 200-day SMA, around the 1.1015 region.


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