EUR/USD Forecast: Euro buyers hesitate as key resistance stays intact

For the second time this week, the EUR/USD pair has lost its traction after advancing to the 1.1670 area, punctuating the importance of this level in the near term. Although the pair continues to trade in the upper half of its weekly range, it is likely to have a difficult time attracting buyers unless it clears that resistance.

In the absence of high-tier macroeconomic data releases, the market mood provides a directional clue by impacting the greenback's market valuation.

Reports of Evergrange making a payment of $83.5 million on bond interest and optimism for a deal on US President Biden's spending agenda allow risk flows to stay alive ahead of the weekend. The US Dollar Index is struggling to gather momentum after snapping a six-day losing streak on Thursday. Moreover, the benchmark 10-year US Treasury bond yield is down more than 1% on Friday, putting additional weight on the dollar's shoulders.

Meanwhile, the data from Germany showed on Friday that the business activity in the private sector expanded at a soft pace in early October with the Markit Composite PMI declining to 52 from 55.5 in September. Similarly, the Composite PMI for the eurozone retreated to 54.3 from 56.2.

Later in the session, Markit Manufacturing PMI data from the US will be looked upon for fresh impetus. More importantly, FOMC Chairman Jerome Powell will be delivering a speech at 1500 GMT. The Fed will go into the blackout period on Saturday, October 23, and this will be the last chance for Powell to deliver a message to markets ahead of the next policy meeting. 

Nonetheless, EUR/USD is likely to remain confined within technical levels with market participants searching for the next fundamental catalyst.

EUR/USD technical analysis

Mirroring EUR/USD's indecisiveness in the near term, the Relative Strength Index (RSI) indicator on the four-hour chart is moving sideways a little above 50. 

On the downside, the initial support is located at 1.1620 (Fibonacci 23.6% retracement of September downtrend). A daily close below that level could open the door for another leg lower toward 1.1600 (psychological level, 100-period SMA) and 1.1560 (static level).

As mentioned above, 1.1670 (Fibonacci 38.2% retracement, 200-period SMA) aligns as a significant hurdle. With a decisive break above that level, 1.1700 (psychological level) and 1.1720 (Fibonacci 50% retracement) could be targeted.