EUR/USD Forecast: Bulls aiming for 1.0900 ahead of Fed speakers

EUR/USD Current price: 1.0868

• The European HCOB Services PMIs unexpectedly indicated expansion in March.
• Tepid United States data maintain the US Dollar under selling pressure.
• EUR/USD keeps advancing despite near-term overbought conditions.

The EUR/USD pair extends its recovery beyond 1.0850 on Thursday, as market players keep dropping the US Dollar, while the Euro benefited from signs of life in the local economy.

Stock markets trade with a better tone on Thursday, providing additional support to USD’s rivals despite Treasury yields continuing their bullish route. Ahead of Wall Street's opening, yields flirt with monthly highs, without signs of turning south.

Positive signs from the Eurozone economy

The Hamburg Commercial Bank (HCOB) and S&P Global released the final estimates of the March Services and Composite Producing Managers Index (PMI), which indicated a subtle yet pivotal shift in the services sector's trajectory. The HCOB Germany Services PMI edged up to 50.1 from 48.3 in February. The survey's findings of sustained job creation and strategic hiring, coupled with a more optimistic business outlook, provide a glimmer of hope for a potential uptick in economic activity.

 Meanwhile, the Eurozone index also indicated expansion, with the composite index climbing to a ten-month peak of 50.3 in March, a decisive move above the stagnation threshold of 50.0. The Services PMI, in the meantime, was confirmed at 51.5. Notably, the stabilization of demand, concerted efforts to address work backlogs, and a third consecutive month of net employment gains have collectively underpinned this resurgence. Furthermore, the surge in business confidence to levels not seen since February 2022 augurs well for future economic activity, providing a solid foundation for the Eurozone's private sector to build upon.

From an inflationary standpoint, the PMI report has also shed light on a welcome moderation in price pressures as the first quarter drew to a close. Although the rates of increase in both input costs and output charges remain elevated compared to pre-pandemic norms, the easing of inflationary headwinds is a salient development for market participants. This deceleration in price growth may offer the European Central Bank (ECB) more leeway in its monetary policy decisions, further supporting the case for a June rate cut.

Finally, the European Central Bank  (ECB) released the Accounts of the March policy meeting, which showed that inflation in the Eurozone is expected to continue its downward trend in the coming months, strengthening the case for considering rate cuts.

Tepid United States data

Across the pond, the United States (US) released the February Goods and Services Trade Balance, which posted a deficit of $68.9 billion, worsening from $-67.4 billion in the previous month. Additionally, Initial Jobless Claims for the week ended March 29 printed at 221K, higher than the 214K anticipated by market players.

The focus remains on Friday's employment report. The Nonfarm Payrolls (NFP) report is expected to show the country added 200K new positions in March, while the Unemployment Rate is expected to remain steady at 3.9%. The upcoming American session will feature multiple Federal Reserve (Fed) speakers and comments on monetary policy may affect the market's mood.

EUR/USD short-term technical outlook

The EUR/USD pair has been gaining bullish momentum, as indicated by the continued recovery from the weekly low at 1.0724. The daily chart shows the pair has advanced above a now directionless 200 Simple Moving Average (SMA) but battles to extend gains beyond a bearish 20 SMA. At the same time, the Momentum indicator has pared its advance below its 100 line, partially losing its upward strength. The Relative Strength Index (RSI) indicator offers a similar picture, decelerating within neutral levels although still offering an upward slope.

 The EUR/USD pair keeps pressuring intraday highs despite technical readings in the 4-hour chart showing the pair is overbought. The 20 SMA gains upward traction well below the current level, while the price has recovered above the longer ones. Technical indicators, in the meantime, keep heading north within extreme levels, hardly offering signs of upward exhaustion. Buyers are now aiming to test the 1.0900 threshold and test bears' mood around the level.

Support levels: 1.0840 1.0800 1.0750

Resistance levels: 1.0900 1.0945 1.0990