EUR/USD Forecast: Bulls remain at the mercy of USD price dynamics

The EUR/USD pair had some good two-way price moved on Thursday and was solely influenced by the US dollar price dynamics. The pair initially built on the previous session's positive move and climbed to 1-1/2 week high level of 1.1172, albeit failed to capitalize, rather lost traction amid resurgent USD demand. As the market was still trying to digest the conclusion of the long-awaited US-China phase one trade deal, the greenback picked up some pace following the release of mostly upbeat US economic releases.

Data released on Thursday showed that the headline retail sales recorded a growth of 0.3%, matching consensus estimates and the previous month's reading. Meanwhile, sales excluding automobiles (core retail sales) rose by 0.7% during the reported month and the closely watched Retail Sales Control Group increased by 0.5%, both surpassing consensus estimates and suggesting that the consumer will continue to keep the economy on solid footing. Adding to this, the Philly Fed Manufacturing Index jumped to 17 points for January as compared to the previous month's reading of 0.3 and much better than a rebound to 3.8 points anticipated.

The pair retreated around 45 pips from daily tops and remained on the defensive through the Asian session on Friday. Bullish traders seemed rather unaffected by better-than-expected Chinese macro data – Industrial Production and Retail Sales. China's fourth-quarter GDP also came in line with market expectations and showed that the economic growth stood at 6%, albeit had a muted impact on the major. Moving ahead, market participants now look forward to the Eurozone current account surplus data and the final consumer price index reading for December for some short-term impetus. Later during the early North-American session, some second-tier US economic data might further contribute towards producing some meaningful trading opportunities on the last of the week.

Short-term technical outlook

From a technical perspective, the pair’s inability to sustain at higher levels and a pullback from a resistance marked by 23.6% Fibonacci level of the 1.0981-1.1239 positive move points to the emergence of fresh selling pressure. A subsequent fall back below the very important 200-day SMA reaffirms the negative bias. Hence, some follow-through weakness, towards 50% Fibo. level support around the 1.1100 handle, now looks a distinct possibility. This is closely followed by another confluence support near the 1.1080 region – comprising of 61.8% Fibo. level and the lower end of the ascending trend channel. A sustained breakthrough the mentioned support levels might be seen as a key trigger for bearish traders and set the stage for a fall back towards challenging the key 1.10 psychological mark with some intermediate support near the 1.1050 region.

On the flip side, momentum back above the 1.1150 region might continue to confront some resistance near the 1.1175-80 region (23.6% Fibo. level), above which the pair seems all set to surpass the 1.1200 handle and aim towards retesting the recent swing high resistance near the 1.1240 region. The momentum could further get extended towards the 1.1300 round figure mark en-route a resistance marked by the top end of a multi-month-old ascending trend-channel, currently near the 1.1340 region.