EUR/USD Forecast: Buying interest recedes despite resurgent optimism

EUR/USD Current Price: 1.0777

• Market attention remains on banking developments and government support.
• The German IFO survey beat expectations in March, underpinning the better mood.
• EUR/USD lacks bullish strength but holds above strong static support at 1.0745.

The EUR/USD pair trades around 1.0770, unchanged on Monday despite a better market mood undermining American dollar demand. The better sentiment is linked to news related to financial stability, as the US government provided additional support to the local financial system. Over the weekend, the Federal Deposit Insurance Corporation (FDIC) announced First Citizens BancShares Inc bought all the loans and deposits of SVB and gave the FDIC equity rights in its stock worth as much as $500 million in return.

The banking sector turmoil, however, is far from over. German Deutsche Bank shares suffered a sell-off on Friday. Most analysts noted there’s no real reason to distrust the German bank, yet the situation clearly reflects the market’s sensibility. Deutsche Bank bounced alongside battered Credit Suisse on Monday, backing the improved sentiment. European indexes trade in the green, pushing Wall Street’s futures higher.

Data-wise, Germany published the IFO survey on Business Climate, which improved in March to 93.3 from 91.1 in the previous month, as the Current Assessment and Expectation also came in better than anticipated. The US will publish the Dallas Fed Manufacturing Business Index, foreseen at -10.9 in March after posting -13.5 in February.

EUR/USD short-term technical outlook

The daily chart for EUR/USD shows that the pair holds at the lower end of Friday’s range. Still, it met buyers ahead of 1.0745, a strong static support level, representing the 61.8% retracement of the 2022 yearly decline. At the same time, technical indicators remain within positive levels, with the Momentum heading north after bouncing around its midline and the Relative Strength Index (RSI) consolidating at 55. Finally, moving averages continue to advance below the current level, reflecting buyers’ dominance.

In the near term, and according to the 4-hour chart, however, the bullish potential seems limited. The pair trades below a flat 20 Simple Moving Average (SMA), providing dynamic resistance at 1.0815. The 100 SMA, in the meantime, heads marginally higher below the current level, just above a flat 200 SMA. The Momentum indicator maintains its bearish slope well into negative territory, while the RSI heads nowhere around 50.

Support levels: 1.0745 1.0700 1.0660

Resistance levels: 1.0815 1.0850 1.0890

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