EUR/USD Forecast: Dollar bulls on pause

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0430

Downbeat Chinese data undermined the market’s mood at the weekly open.
The European Commission downwardly reviewed the growth forecast and upgraded the inflation one.
EUR/USD advanced modestly, but its bullish potential is still limited.

The EUR/USD pair trades around 1.0430 ahead of Wall Street’s open, marginally up on Monday. Financial markets started the week on the backfoot, as Chinese data released during the Asian session spurred concerns about economic growth. Retail Sales in the country fell by 11.1% YoY in April, while in the same period, Industrial Production contracted by 2.9%. Stocks fell, and the American dollar surged with the news, although the dismal mood receded within European trading hours, helping EUR/USD to recover from an intraday low of 1.0388.

However, the shared currency has not many reasons to rally. The European Commission reviewed their economic growth projections to the downside amid the war in Ukraine, while they now see inflation rising at a faster pace this year and holding above the European Central Bank target through 2023.

Data wise, Germany released the April Wholesale Price Index, which rose 2.1% MoM and 23.8% YoY, much worse than anticipated. The EU published the March Trade Balance, which posted a seasonally adjusted deficit of €-17.6 billion. The US will not unveil relevant data, with the focus on April Retail Sales to be out on Tuesday.

EUR/USD short-term technical outlook

The EUR/USD pair holds near its daily high of 1.0437, but the daily chart suggests the advance could be short-lived. The pair keeps developing below firmly bearish moving averages, while technical indicators are correcting oversold conditions, holding within negative levels. The 20 SMA is currently around 1.0585, providing dynamic resistance.

The 4-hour chart shows that a bearish 20 SMA rejected bulls, while technical indicators turned directionless within negative levels. The longer moving averages maintain their downward slopes far above the shorter one, reflecting bears’ dominance. The pair still has room to test the 1.0340 region, while a break below it should signal a steeper decline towards the 1.0200 region.

Support levels: 1.0385 1.0340 1.0300

Resistance levels: 1.0470 1.0510 1.0555

View Live Chart for the EUR/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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