EUR/USD Forecast: ECB’s dovishness hits the EUR

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0874

The ECB surprised investors with a dovish monetary policy decision.
US data missed expectations, March Retail Sales advanced a modest 0.5% MoM.
EUR/USD is technically bearish and could extend its slump to fresh yearly lows.

The EUR/USD pair reached an intraday high of 1.0923, holding nearby ahead of the European Central Bank monetary policy decision. The central bank surprised with a dovish decision, as it maintained rates on hold, as anticipated, and also announced it would end its bond-buying APP program in the third quarter of the year. Monthly net purchases will amount to €40 billion in April, €30 billion in May and €20 billion in June.

Generally speaking, the statement was dovish as the document noted that Russia's aggression is affecting the economies in Europe and beyond. Higher energy and commodity prices are affecting demand and slowing production, which result in higher inflation. Also, trade disruptions are leading to new shortages of materials and inputs, another factor weighing on prices pressure. The EUR/USD pair fell with the announcement towards the 1.0860 area.

Meanwhile, and as ECB President Christine Lagarde offers a speech, the US released March Retail Sales, which were up by 0.5% MoM, below the 0.6% expected. Also, Initial Jobless Claims for the week ended April 8 printed at 185K worse than anticipated. Finally, the country released March Import and Export Prices, beating the market’s expectations. Later in the session, the US will release the preliminary estimate of the April Consumer Sentiment Index.

EUR/USD short-term technical outlook

The EUR/USD pair currently trades in the 1.0870 region, and the daily chart shows that the risk remains skewed to the downside. The pair keeps trading well below a bearish 20 SMA, which converges with a Fibonacci resistance level at 1.0965. Technical indicators, in the meantime, remain directionless within negative levels.

The 4-hour chart shows that the pair is currently hovering around a flat 20 SMA, while the longer ones maintain their bearish slope well above the current level. At the same time, technical indicators turned lower, and are currently accelerating south below their midlines, hinting at further declines ahead.

Support levels: 1.0850 1.0800 1.0760

Resistance levels: 1.0930 1.0965 1.1000

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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