EUR/USD Forecast: Dollar extends gains amid risk-off mood

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0655

Mounting tensions between the United States and Russia undermine the market’s mood.
S&P Global PMIs in the EU were mixed in February, according to preliminary estimates.
EUR/USD extends its weekly decline and nears the February low at 1.0612.

The EUR/USD pair is down on Tuesday as risk aversion dominates financial markets. The pair slid to 1.0642 during European trading hours as mounting geopolitical tensions weighed on the market’s mood. United States President Joe Biden’s unexpected visit to Ukraine spurred concerns, later fueled by headlines indicating the US suspects China is considering providing military support to Russia, which would be a “serious problem,” according to Secretary of State Antony Blinken.

Mixed Euro Zone data maintained the Euro on the back foot. S&P Global published the preliminary estimates of its February PMIs, which showed that manufacturing output contracted from the previous month. The German index came down to 46.5, while the EU one printed at 48.5. On the other hand, services activity improved more than anticipated, with the EU Services PMI up to 53.0, an eight-month high, and the German Services PMI reaching 51.3. The Composite PMI for both economies surpassed the 50 level, indicating economic expansion.

Also, Germany published the February ZEW Survey, which showed that Economic Sentiment in the country improved to 28.1, while for the whole EU, it came in at 29.7, both beating expectations.

After Wal Street’s opening, S&P Global will publish the US PMIs while the country will publish January Existing Home Sales.

EUR/USD short-term technical outlook

The EUR/USD pair trades near its intraday low, and bears are looking to challenge the low set last week at 1.0612. Technical readings in the daily chart support a continued decline as the pair continues to develop below a bearish 20 SMA while also below a critical Fibonacci level, the 61.8% retracement of the 2022 decline at 1.0745. At the same time, technical indicators picked bearish momentum, heading firmly lower within negative levels and at their lowest since last October.

In the near term, and according to the 4-hour chart, the chances of a downward extension are pretty clear. The pair is sliding below a bearish 20 SMA while the longer moving averages remain far above the shorter one. The Momentum indicator remains flat at around its 100 line, but the RSI indicator heads firmly south at around 41.

Support levels: 1.0610 1.0570 1.0525

Resistance levels: 1.0700 1.0745 1.0790

View Live Chart for the EUR/USD

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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