EUR/USD Forecast: Battling to extend gains beyond parity

EUR/USD Current Price:  0.9994

• Market players raised odds for Fed’s and ECB’s rate hikes after Jackson Hole.
• German inflation and US Consumer Confidence under the spotlight.
• EUR/USD recovered towards parity, but follow-though technically unclear.

The EUR/USD pair started the week on the back foot but recovered as the day went by and finished Monday hovering around parity. Speculative interest was torn between recession fears and central banks’ hawkishness. Following the Jackson Hole Symposium, odds for a US Federal Reserve 75 bps rate hike rose above 70% according to the CME FedWatch tool. Across the pond, market players are seeing odds for a similar hike in Europe at 67%, up from 48% on Friday.

Meanwhile, the President of the European Commission, Ursula von der Leyen, put the energy crisis back on the table. She reported that the EU is preparing an emergency intervention to ease skyrocketing electricity prices in its energy market. The news halted EUR/USD recovery but had no near-term negative impact on the shared currency.

Data-wise, the macroeconomic calendar remained scarce. The US published the August Dallas Fed Manufacturing Business Index, which improved to -12.9 from -22.6 in July, also beating the market expectations. On Tuesday, the EU will release the August Economic Sentiment Indicator, while Germany will publish the preliminary estimate of the August Consumer Price Index. Finally, the US will publish CB Consumer Confidence, foreseen improving to 97.6 from 96.7 previously.

EUR/USD short-term technical outlook

From a technical point of view, the long-term bullish potential remains limited. The daily chart shows that the pair keeps developing below firmly bearish moving averages, with the 20 SMA currently at around 1.0120. Technical indicators, in the meantime, remain well into negative territory, aiming marginally higher, although without strength enough to confirm a new leg north.

In the near term, and according to the 4-hour chart, the risk skews to the upside, although momentum is easing. The pair managed to break above a mildly bullish 20 SMA. However, the 100 SMA heads firmly lower above the current level and after crossing below the 200 SMA, reflecting dominant selling interest. Technical indicators, in the meantime, recovered above their midlines, the Momentum maintaining its upward slope, but the RSI is currently flat at around 54. Bulls may have better chances if the market sentiment improves, pushing the pair firmly up above 1.0030, the immediate resistance level.

Support levels:  0.9985 0.9940 0.9895

Resistance levels: 1.0030 1.0080 1.0120

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