EUR/USD Forecast: Bulls struggle to make it through 1.0900 mark, ECB eyed for fresh impetus

  • Sustained USD selling assisted EUR/USD to regain positive traction on Wednesday.
  • Awful US GDP, dovish Fed did little to ease the bearish pressure surrounding the buck.
  • The upside remained capped below the 1.0900 mark as the focus now shifts to ECB.

Following the previous day's intraday pullback, the EUR/USD pair managed to regain some positive traction on Wednesday and was being supported by a broad-based US dollar weakness. The global risk sentiment remained firm amid the latest optimism over the re-opening of economies in some parts of the world and continued weighing on the greenback's relative safe-haven status against its European counterpart. The shared currency was further supported by higher than forecast German flash inflation figures, which showed that the headline CPI is seen rising 0.8% YoY in April.

Meanwhile, the already weaker sentiment surrounding the USD deteriorated further in reaction to the advance GDP report that showed the economy contracted by 4.8% during the first quarter of 2020. The reading was worse than the 4.0% decline expected and marked the largest decline since 2008. The greenback maintained its heavily offered tone after the Fed dampened expectations for a quick economic recovery and cautioned that the negative impact from the coronavirus pandemic could prolong in the medium term. The Fed also pledged to maintain the ultra-loose monetary policy and indicated that there is room to increase stimulus if needed.

The pair jumped back closer to near two-week tops set in the previous session, albeit continued with its struggle to capitalize on the move and remained below the 1.0900 round-figure mark. The pair edged lower during the Asian session on Thursday as the focus now shifts to the very important European Central Bank (ECB) meeting later during the European session. The ECB is expected to leave its policy unchanged, though some analysts are looking for expansion of debt purchases to include junk-rated corporate bonds and announcement of other steps to ease conditions in credit markets. This will be followed by the post-meeting press conference, where comments by the ECB President Christine Lagarde’s might infuse some volatility around the euro.

Heading into Thursday's key event risk, the release of the preliminary Eurozone GDP and consumer inflation figures will influence the shared currency. Later during the early North-American session, the release of Initial Weekly Jobless Claims from the US might further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much for the pair and bulls are likely to wait for a sustained strength beyond the 1.0900 mark before positioning for any further near-term appreciating move. Above the mentioned barrier, the pair is likely to move towards testing 50-day SMA, around the 1.0955 region, before eventually aiming to reclaim the key 1.10 psychological mark. The latter coincides with 100-day SMA and should now act as a key pivotal point for the pair’s next leg of a directional move.

On the flip side, immediate support is pegged near the 1.0830 level and is closely followed by the 1.0800 round-figure mark. A convincing breakthrough the mentioned support levels, leading to a subsequent fall below the 1.0775 area would be seen as a key trigger for bearish traders. The pair might then turn vulnerable to accelerate the slide further towards challenging the 1.0700 mark en-route YTD lows, around the 1.0635 region.


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