EUR/USD Forecast: Euro should clear 1.1020 hurdle to attract bulls

EUR/USD trades in its weekly range near 1.1000 on Friday.
Thursday's action confirmed 1.1020 as key near-term resistance.
Producer Price Index and consumer sentiment data will be featured in the US economic calendar.

Eren Sengezer FXStreet

EUR/USD holds steady at around 1.1000 on Friday after climbing above 1.1060 on Thursday, its highest level in two weeks. Still, Thursday's uptick was short-lived and the pair failed to preserve its bullish momentum, closing the day virtually unchanged slightly below 1.1000.

Inflation in the US, as measured by the change in the Consumer Price Index (CPI), edged higher to 3.2% on a yearly basis in July from 3% in June. Monthly CPI and Core CPI, which excludes volatile food and energy prices, rose 0.2%, matching June readings and market expectations.

The immediate reaction triggered a short-lasting US Dollar sell-off and helped EUR/USD stretch higher. The cautious market stance, however, caused the pair to erase its daily gains.

The Euro Stoxx Index is down more than 1% in the European morning and US stock index futures trade flat on the day, preventing EUR/USD to gain traction.

In the second half of the day, July Producer Price Index (PPI) data and the University of Michigan's preliminary Consumer Confidence Index data for August will be featured in the US economic docket. Annual PPI is forecast to rise 0.7% in July following June's 0.1% increase. A downside surprise, with a reading close to June's print, could weigh on the USD. The market reaction to Thursday's CPI data, however, remained short-lived, suggesting that PPI figures are unlikely to have a lasting impact on EUR/USD action ahead of the weekend.

EUR/USD Technical Analysis

After rising above 1.1020 (100-period Simple Moving Average (SMA), 200-period SMA), EUR/USD failed to make a 4-hour close above that level, highlighting the importance of this resistance. Once 1.1020 is confirmed as support, the pair could target 1.1050 (Fibonacci 38.2% retracement of the latest downtrend), 1.1090-1.1100 (Fibonacci 50% retracement, static level) and 1.1130 (Fibonacci 61.8% retracement).

On the downside, 1.0980 (20-period SMA, 50-period SMA) aligns as first support before 1.0950 (broken descending trend channel). A 4-hour close below the latter could bring in additional sellers and open the door for an extended decline to 1.0920, the end-point of the latest downtrend.

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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