EUR/USD Forecast: Bears on pause but still in control

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0721

Encouraging Asian news underpinned the market sentiment at the weekly opening.
The European Commission downwardly revised the EU growth projections.
EUR/USD modest bounce can not anticipate further gains ahead.

The US Dollar started the week with a softer tone, as optimistic Asian news boosted the sentiment. The EUR/USD pair peaked during European trading hours at 1.0740, trading a handful of pips below the level and with the USD not far from its recent highs.

The USD/JPY pair gapped lower at the opening amid comments from Bank of Japan (BoJ) Governor Kazuo Ueda, hinting at a shift of the ultra-loose monetary policy. “The BoJ could have enough data by year-end to determine whether it can end negative rates,” Ueda noted, adding they will focus now on a “quiet exit.” The news put pressure on the USD.

Furthermore, signs that the Chinese economy revives underpinned the mood. China’s inflation picked up modestly in August, following a negative reading in July. The Consumer Price Index (CPI) rose 0.3% MoM and 0.1% YoY. At the same time, mortgage demand and corporate loans surged, suggesting the country could be turning the corner.

The Euro eased modestly following the release of the Eurozone Economic Forecasts report, as the European Commission downwardly revised growth projections. The EU GDP is now seen at 0.8% in 2023 and 1.3% in 2024, down from 1.1% and 1.6%, respectively, in May’s document.

European stock markets hold in the green but pulled back from their early highs. At the same time, US futures aim for a positive start, although it does not seem the USD will stay on the bearish path ahead of key data releases later this week. The United States (US) will publish the August CPI on Wednesday, while the European Central Bank (ECB) will unveil its monetary policy decision on Thursday. Meanwhile, the US macroeconomic calendar has nothing relevant to offer this Monday.

EUR/USD short-term technical outlook

The EUR/USD pair holds on to modest gains after ending Friday at 1.0697, now trading around the 1.0720 level. The bullish potential seems well limited, according to technical readings in the daily chart, as indicators barely recovered from their recent lows, developing within negative levels and without enough strength to support additional gains. At the same time, the pair is developing below all its moving averages, with the 20 Simple Moving Average (SMA) crossing below the 200 SMA, both roughly 100 pips above the current level.

EUR/USD is neutral-to-bearish according to the 4-hour chart. The pair is developing above a flat 20 SMA, while the longer moving averages head firmly south far above the current level. Finally, the Momentum indicator remains flat at around its 100 level, while the Relative Strength (RSI) index heads marginally lower at around 46. The bearish case will become firmer if the pair slides below 1.0707, the intraday low.

Support levels: 1.0705 1.0670 1.0630

Resistance levels: 1.0755 1.0790 1.0830

View Live Chart for EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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