EUR/USD Forecast: Dangerously close to the yearly low at 1.0694

EUR/USD Current price: 1.0741

• The European Central Bank kept the monetary policy unchanged, as expected.
• United States macroeconomic data was encouraging, providing a bit of relief to financial markets.
• EUR/USD consolidates losses near the yearly low, retains the bearish stance.

The EUR/USD pair consolidated losses on Thursday, extending its weekly slide to 1.0714 after the European Central Bank (ECB) decided to keep rates unchanged. The Marginal Lending Facility Rate was confirmed at 4.75%, while the Deposit Facility Rate was confirmed at 4.00%, as widely anticipated. The news was hardly a surprise, and market players kept waiting for President Christine Lagarde's clues and United States (US) data.

The US reported the March Producer Price Index (PPI), which rose 0.2% MoM and 2.1% YoY, below expectations. Core annual PPI, however, was up 2.4% above the 2.3% expected and the 2.1% (revised from 2.0%) posted in February. At the same time, Initial Jobless Claims for the week ended April 5 were up by 211K, better than the 215K expected and easing from the previous 222K. The news brought some relief and pushed the US Dollar marginally lower as stock markets recovered some of the ground lost on Wednesday.

As ECB's Lagarde kick starts her speech, EUR/USD hovers around 1.0740, little changed on a daily basis. Stock markets got a modest boost, which limited US Dollar demand. The pair, however, is yet to react to the ECB's decision

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair retains its bearish stance. The daily chart shows it develops far below all its moving averages, with the 20 Simple Moving Average (SMA) gaining bearish traction and crossing below a flat 200 SMA, usually a sign of a bearish continuation. Technical indicators, in the meantime, lost their downward strength but remain within negative levels.

In the near term, and according to the 4-hour chart, EUR/USD seems oversold, but there are no signs of bearish exhaustion. Technical indicators maintain modest downward slopes near extreme readings while moving averages gain downward traction. The 20 SMA crosses below an also bearish 100 SMA, both at around 1.0820. A critical support level comes at 1.0694, the year low. A break below the level should put the EUR/USD pair back on the bearish track.

Support levels: 1.0690 1.0650 1.0610

Resistance levels: 1.0770 1.0800 1.0840  

(This story was corrected on April 11 at 14:18 GMT to say that February’s core PPI was revised to 2.1% from 2.0%)