EUR/USD Forecast: Euro needs to reclaim 1.0450 to remain bullish

EUR/USD has staged a rebound during the Asian trading hours but lost its traction near 1.0400. Following Monday's volatile action, the technical outlook suggests that the pair is likely to gather bullish momentum once it stabilizes above 1.0450.

Despite the risk-averse market environment, the US Dollar struggled to find demand in the first half of the day on Monday and EUR/USD reached its strongest level in five months near 1.0500. With Wall Street's main indexes suffering heavy losses after the opening bell, however, the pair came under bearish pressure and ended up closing the day in negative territory. Hawkish comments from Fed officials also provided a short-term boost to the US Dollar.  

Early Tuesday, the positive shift witnessed in risk mood seems to be helping EUR/USD cling to modest daily gains. Renewed optimism about China continuing to move away from the zero-Covid policy after Global Times commentator Hu Xijin tweeted that China may "walk out of the shadow of COVID-19 sooner than expected," allowed risk flows to return to markets.

Later in the session, the European Commission will release the business and consumer sentiment surveys for the Eurozone. More importantly, Germany's Destatis will publish the November inflation report. The Consumer Price Index (CPI) in Germany is forecast to edge lower to 10.3% on a yearly basis from 10.4% in October. In case the annual CPI continues to rise unexpectedly in November, the Euro is likely to gather strength and vice versa. While testifying before the European Parliament on Monday, European Central Bank President Christine Lagarde reiterated that interest rates will remain as their primary tool to fight inflation. 

The US economic docket will feature the Conference Board's Consumer Confidence Index for November. Nonetheless, market participants are likely to stay focused on risk perception. US stock index futures are up between 0.3% and 0.6% in the European morning and a decisive rebound in Wall Street could hurt the US Dollar, lifting EUR/USD in the American session.

EUR/USD Technical Analysis

The 20-period Simple Moving Average (SMA) on the four-hour chart aligns as interim resistance for EUR/USD ahead of 1.0450, where the ascending trend line is located. In case the pair rises above the latter and starts using it as support, it could target 1.0500 (psychological level, multi-month high set on Monday) and 1.0530 (static level).

On the downside, immediate support is located at 1.0350 (50-period SMA) before 1.0300 (static level, psychological level) and 1.0280 (100-period SMA).

Meanwhile, the Relative Strength Index (RSI) indicator stays close to 50, suggesting that EUR/USD is lacking directional momentum for the time being.