EUR/USD Forecast: Bears add pressure despite a better market mood

EUR/USD Current price: 1.0693

• Eurozone HCOB Manufacturing PMIs were upwardly revised in April.
• Financial markets remain optimistic despite mixed US data.
• EUR/USD gains downward traction in the near term, support at 1.0645.

The US Dollar is in recovery mode on Thursday after edging sharply lower on Wednesday following the United States (US) Federal Reserve (Fed) monetary policy announcement. The Fed kept rates on hold and was mostly hawkish, as anticipated. However, the news were less concerning than expected, as Chairman Jerome Powell and co seemed not terribly concerned about the economic situation and maintained the door open for upcoming rate cuts.

The USD edged sharply lower with the news, pushing EUR/USD towards the 1.0730 region. The Greenback managed to recover some ground during Asian trading hours and early in Europe, but retains its weak tone amid an optimistic market mood.

Data-wise, the Hamburg Commercial Bank (HCOB) and S&P Global released the final estimates of their April Manufacturing PMIs. European figures were encouraging, as the German index was confirmed at 42.5, while the Eurozone one hit 45.7, both above the previous estimates. In the US, the Goods and Services Trade Balance posted a deficit of $69.4 billion in March, worse than anticipated. Initial Jobless Claims declined to 208K in the week ending April 26, beating the 212K expected. Finally, Nonfarm Productivity in the first quarter of the year rose a modest 0.3%, while Unit Labor Cost in the same period was up 4.7%, higher than the 3.6% forecast.

EUR/USD short-term technical outlook

The USD remains on the back foot against most major rivals,  with EUR/USD hovering around 1.0700 ahead of Wall Street’s opening. The daily chart offers a neutral picture, although the risk skews to the downside. The pair is still battling to recover above a bearish 20 Simple Moving Average (SMA) to no avail. At the same time, the 100 and 200 SMAs gain downward traction far above the longer ones. Finally, the Momentum indicator aims higher within neutral levels, while the Relative Strength Index (RSI) indicator suggests limited buying interest, consolidating at around 45.

The 4-hour chart shows bears are gaining strength. Technical indicators turned lower, although within neutral levels. At the same time, the pair is pressuring a flat 20 SMA while the 100 SMA heads south a few pips below the shorter one. A break through 1.0645 should anticipate a steeper decline, with eyes on a break below 1.0600, the year´s low.

Support levels: 1.0645 1.0600 1.0565

Resistance levels: 1.0740 1.0785 1.0810