EUR/USD Forecast: Dollar up as recession fears weigh on sentiment

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0558

S&P cut the EU’s economic growth forecasts to 2.6% for this year.
US Durable Goods Orders were up 0.7% MoM in May, beating expectations.
EUR/USD is technically neutral, but the risk skews to the downside.

The EUR/USD pair advanced on Monday and is currently trading in the 1.0550 price zone after peaking at 1.0590. The dollar started the week on the backfoot but grinds higher ahead of the US opening as the market mood turns sour. Stock markets trade on positive ground but off early highs, while government bond yields advance, underpinning the American currency.

Recession-related fears are the main theme these days. During European trading hours, news showed that S&P cut EU’s economic growth forecasts to 2.6% for this year. As for the US, the country has just published May Durable Goods Orders, which were up 0.7% MoM, beating expectations of a flat reading. The positive headline, however, had no notable impact on currencies.

Later today, the European Central Bank will host the annual Forum on Central Banking, with ECB’s President Christine Lagarde offering the opening remarks, while the US will release May Pending Home Sales.

EUR/USD short-term technical outlook

The EUR/USD pair is marginally higher for a second consecutive day, but its bullish potential remains limited. The daily chart shows that sellers are defending the upside at around a bearish 20 SMA, while the longer ones maintain their firmly bearish slopes far above. Technical indicators, in the meantime, remain directionless within negative levels. At the same time, the pair is developing below a daily descendant trend line coming from this year’s high at 1.1494, currently at around 1.0670.

The near-term picture is neutral, as the pair is holding above a mildly bullish 20 SMA but unable to advance beyond a flat 200 SMA. The Momentum indicator consolidates around its 100 level, reflecting the absence of directional strength, while the RSI is turning lower at around 57, signaling decreasing buying interest. The risk could turn to the downside if the pair slides below 1.0520, while bulls could take advantage of a clear break of the 1.0600 price zone.

Support levels: 1.0550 1.0520 1.0480

Resistance levels: 1.0600 1.0640 1.0675

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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