EUR/USD Forecast: Bulls take a brief pause near 50% Fibo./200-DMA confluence region


  • EUR/USD built on its recent recovery momentum amid some heavy USD selling pressure.
  • Narrowing US-German bond yield spread underpinned the euro and remained supportive.

The EUR/USD pair added to its recent recovery gains and continued scaling higher on Thursday amid the prevailing bearish sentiment surrounding the US dollar. Against the backdrop of the Fed's unlimited QE, a massive $2.2 trillion US economic stimulus package eased concerns over a global recession and prompted some heavy USD selling.

The already weaker sentiment surrounding the buck deteriorated further the Fed Chair Jerome Powell hinted towards additional monetary easing and said that there is still room for more action to combat coronavirus crisis. Adding to this, an unprecedented jump in US initial weekly jobless claims underscored the devastating impact on the economy from the coronavirus pandemic and aggravated the bearish pressure surrounding the buck.

On the other hand, the European Central Bank (ECB), in a landmark decision on Thursday, scrapped most of the bond-buying limits in its 750 billion-euro pandemic emergency program in order to boost its firepower to fight the economic fallout from the coronavirus. This coupled with a relentless decline in the US-German bond yield spread provided a strong lift to the shared currency. The positive momentum took along some near-term trading stops placed near the key 1.10 psychological mark, which further contributed to the pair's strong intraday upsurge of over 180 pips.

The pair settled near the top end of its daily trading range and climbed to near two-week tops during the Asian session on Friday, rising for the sixth consecutive session. There isn't any major market-moving economic data due for release on Friday, either from the Eurozone or the US. Hence, developments surrounding the coronavirus saga might continue to influence the broader market risk sentiment and infuse volatility in the FX market.

Short-term technical outlook

From a technical perspective, bulls now seemed to have paused near a confluence region comprising of the 50% Fibonacci of the 1.1497-1.0636 recent slump and the very important 200-day SMA. Some follow-through buying will reaffirm the recent near-term bullish trend and lift the pair further beyond the 1.1100 round-figure mark, towards testing 61.8% Fibo. level hurdle near the 1.1165-70 region. On the flip side, the 1.10 mark now becomes immediate strong support to defend. Any subsequent slide might now be seen as a buying opportunity and should remain limited near the 38.2% Fibo. level, around the 1.0965-60 region.

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