EUR/USD Forecast: Bearish pressure eases amid coronavirus optimism

The EUR/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses on the first day of a new trading week. The pair failed to capitalize on its early uptick, rather met with some fresh supply near the 1.0830-35 region and dropped to fresh two-week lows. The shared currency was undermined by the disappointing release of the EU Sentix Investor Confidence index, which plunged to -42.9 in April as compared to -17.1 previous and worse than -30.3 expected.

Despite the pullback, the pair continued showing some resilience at lower levels and managed to rebound around 25 pips from daily lows amid a sharp turnaround in the global risk sentiment. The fact that the number of new coronavirus cases fell in the European hotspots – Italy and Spain – and the centre of the US outbreak – New York – was seen as signs that the pandemic may be reaching its peak. This eventually triggered a strong rally in the global equity markets, which dented the US dollar's perceived safe-haven status and extended some support to the major.

The greenback remained on the defensive through the Asian session on Tuesday and assisted the pair to gain some positive traction, snapping six consecutive days of losing streak. In the absence of any major market-moving economic releases, either from the Eurozone or the US, developments surrounding the coronavirus saga might continue to influence the broader market risk sentiment and play a key role in producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the lack of any strong follow-through selling now warrants some caution for bearish traders. Hence, it will be prudent to wait for a sustained weakness below the 1.0775-70 region before positioning for any further near-term depreciating move. Below the mentioned support, the pair is likely to accelerate the fall towards challenging the 1.0700 round-figure mark before eventually dropping to test YTD lows, around the 1.0635 area.

On the flip side, any subsequent recovery is likely to confront some fresh supply near the 1.0900 round-figure mark. A convincing break through might trigger a fresh bout of a short-covering move and lift the pair further towards 50-day SMA, around the 1.0970-75 region. The momentum could further get extended towards the key 1.10 psychological mark.