EUR/USD Forecast: Euro could rebound in case 1.0450 support stays intact


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  • EUR/USD has been fluctuating in a tight channel following a two-day decline.
  • The pair could edge higher in case buyers continue to defend 1.0450.
  • Easing of coronavirus restrictions in China doesn't seem to be helping the market mood improve.

EUR/USD has been moving sideways below 1.0500 since the beginning of the day on Wednesday after having closed the first two days of the week modestly lower. The near-term technical outlook suggests that the pair could stage a rebound in case it manages to hold above 1.0450.

In the absence of high-impact macroeconomic data releases, the risk-averse market environment helped the US Dollar preserve its strength on Tuesday and forced EUR/USD to edge lower during the American trading hours. 

In its continuous effort to move away from the zero-Covid policy, China announced early Wednesday that they will allow asymptomatic and mildly-symptomac positive cases to quarantine at home for seven days. Furthermore, the Chinese government said that mass PCR testing will be restricted to hospitals, schools and nursing homes.

This development, however, doesn't seem to be having a noticeable impact on risk mood so far on the day. US stock index futures trade flat on the day and the US Dollar Index, which is already up 1% this week, holds steady slightly above 105.50. 

If investors cheer China news and there is a steady recovery in Wall Street's main indexes in the second half of the day, the US Dollar could lose interest and open the door for a rebound in EUR/USD.

The US economic docket will feature Nonfarm Productivity and Unit Labor Costs data for the third quarter. Last week, the US Bureau of Labor Statistics reported that the annual wage inflation, as measured by the Average Hourly Earnings, rose to 5.1% from 4.9% in October. Unit Labor Costs are forecast to decline to 3.2% in Q3. A stronger-than-forecast print should support the US Dollar and vice versa.

EUR/USD Technical Analysis

The 50-period Sİmple Moving Average on the four-hour chart and the Fibonacci 38.2% retracement of the latest uptrend form strong support at 1.0450. In case  EUR/USD falls below that level and starts using it as resistance, it could extend its slide toward 1.0400, where the 100-period SMA and the Fibonacci 50% retracement align.

On the upside, 1.0500 (Fibonacci 23.6% retracement) aligns as initial resistance before 1.0520 (20-period SMA) and 1.0580 (static level).

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