EUR/USD Forecast: Bulls paused but aim for higher highs

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0874

The US Dollar remains on the back foot following a dovish US Federal Reserve.
The Bank of England announced its monetary policy decision but failed to impress.
EUR/USD pared gains and eased modestly from 1.0929, retaining its bullish potential.

The EUR/USD pair is in a corrective decline after peaking at 1.0929, its highest in almost two months. A dovish United States Federal Reserve triggered a US Dollar sell-off on Wednesday, which extended during Asian trading hours. EUR/USD extreme overbought conditions weighed on investors, who took some profits out of the table ahead of the Bank of England (BoE) monetary policy decision.

The BoE delivered as expected a 25 basis points (bps) rate hike but was read as hawkish, as the central bank noted that "if there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required," cooling hopes for an upcoming pause. The announcement hardly affected the FX board, with EUR/USD trading at around 1.0870 before and after the announcement.

Data-wise, the US published Initial Jobless Claims for the week ended March 17, which came out better than anticipated at 191K. Also, the country published the Chicago Fed National Activity Index, which fell to -0.19 in February from 0.23 in the previous month. The country will later publish New Home Sales and the Kansas Fed Manufacturing Activity Index, while the EU will release the March Consumer Confidence preliminary estimate.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair supports further advances as the pair continues reaching higher highs while posting higher lows since bottoming at 1.0515 on March 15. Furthermore, the pair extends its advance beyond bullish moving averages, with the 20 Simple Moving Average (SMA) gaining upward traction above the longer ones. Technical indicators, in the meantime, have turned flat within positive levels without signs of upward exhaustion.

In the near term, and according to the 4-hour chart, chances for the corrective decline to continue are limited. Indeed, technical indicators are easing from extreme overbought readings but without bearish strength and are still far above their midlines. At the same time, the 20 SMA heads firmly north, well above the longer ones, and above the critical Fibonacci support at 1.0745, the 61.8% retracement of the 2022 yearly decline.

Support levels: 1.0840 1.0800 1.0750

Resistance levels: 1.0890 1.0930 1.0980

View Live Chart for the EUR/USD

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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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