EUR/USD Analysis: Struggles to register any meaningful recovery, remains vulnerable

Having refreshed multi-month lows by a few pips, the EUR/USD pair staged a modest recovery on Wednesday and seemed largely unaffected by the ongoing US dollar upsurge. The greenback added to its recent gains and rallied to near three-year tops amid some heavy selling around the safe-haven Japanese yen. The already stronger sentiment surrounding the buck got an additional boost following the release of better-than-expected US economic releases – Producer Price Index (PPI) and housing market data.

The US PPI rose 0.5% MoM, pushing the yearly rate to 2.1% in January, well above consensus estimates. Adding to this, the core PPI also surpassed expectations and rose 0.5% MoM, 1.7% YoY rate. The USD remained well supported following the release of the minutes of the latest FOMC meeting held on January 28-29, judging the current monetary stance was appropriate and indicating that interest rates will likely be on hold for a time.

The uptick, however, lacked any bullish conviction and remained capped amid the coronavirus outbreak-led pessimism about the Eurozone growth outlook – in particular the export-driven German economy. The pair edged lower during the Asian session on Thursday and was last seen hovering around the 1.0800 round figure mark. Market participants now look forward to the release of the German GfK Consumer Climate Index for some impetus. Germany will also report the Producer Price Index for January, though is unlikely to be a major game-changer. Later during the early North-American session, the release of the usual weekly unemployment claims, along with the Philly Fed Manufacturing Index from the US might influence the USD price dynamics and further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair’s inability to register any meaningful recovery despite extremely oversold conditions suggests that the near-term bearish pressure might still be far from over. However, it will be prudent to wait for some strong follow-through selling below a support marked by the lower end of over one-year-old descending trend-channel, currently near the 1.0775 region, before positioning for any further near-term depreciating move. A convincing break through will be seen as a fresh trigger for bearish traders and pave the way for a further near-term depreciating move. The pair then might accelerate the fall further towards testing the 1.0700 round-figure mark.

On the flip side, any attempted recovery seems more likely to confront some fresh supply near the 1.0830 horizontal level, which is closely followed by resistance near mid-1.0800s. Some follow-through buying might trigger a fresh bout of a short-covering move and lift the pair further beyond the 1.0870-75 intermediate resistance, towards reclaiming the 1.0900 round-figure mark.