EUR/USD Forecast: Bearish, key support at 1.0890

US Dollar rises across the board as market sentiment deteriorates.
Euro remains unable to benefit from rate hike expectations from the ECB.
EUR/USD dropped sharply on Thursday, reaffirming the negative short-term outlook.

Matías Salord FXStreet

The EUR/USD pair is on its way to the lowest daily close in a month, weighed by a stronger US Dollar and a deterioration in market sentiment. The retreat from near 1.1100 extended, with the pair hitting briefly levels under 1.0900.

European Central Bank (ECB) Vice President Luis de Guindos did not commit on rates and showed he is still concerned about service and core inflation. Joachim Nagel said decisions will be taken meeting-by-meeting. More speeches are scheduled for Friday. Regarding data, France and Spain will release final inflation figures for April that should not offer new information.

The US Dollar benefited from risk aversion. Government bond yields rebounded during the American session. Data from the US pointed to a slowdown in inflation and a rise in the labor market. Initial Jobless Claims jumped to 264,000, the highest since October 2021 while the Producer Price Index slowed down from 2.7% in March to 2.3% in April. On Friday, US Consumer Confidence data will be released.

The key driver ahead is set to be market sentiment. During the last sessions the EUR/USD has not been a strong safe-haven, so more concerns could trigger more losses, adding fuel to volatility.

EUR/USD short-term technical outlook

The EUR/USD dropped further, holding a negative stance under a, now bearish, 20-day Simple Moving Average (SMA). The pair needs to rise firmly above 1.1015 in order to improve the outlook for the Euro.

On the 4-hour chart, the pair is moving in a downward channel. EUR/USD rebounded after hitting the lower bottom. A recovery above 1.0945 could boost an extension to 1.0980. But the negative bias will prevail while under 1.1015. A bearish acceleration seems unlikely while above 1.0885; however, if it breaks and holds below it, it would initially target 1.0840.

View Live Chart for the EUR/USD

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Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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