EUR/USD Forecast: Euro recovers above 1.0825, still not out of the woods
EUR/USD Current Price: 1.0857
- US dollar corrects and falls across the board on lower US yields.
- Inflation above expectations in Germany, ECB talk offset Lagarde’s message.
- EUR/USD with bullish momentum while above 1.0825
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The EUR/USD is up for the second day in a row on Wednesday as it moves further away from two-year lows. The combination of a weaker greenback and a modestly stronger euro pushed the pair to the upside. Still, the trend points to the downside.
After rising for many days, the US Dollar Index (DXY) dropped significantly from the highest level in years. The decline is a correction and does not represent yet a threat to the current positive trend for the dollar. The divergence of monetary policy expectations between the Federal Reserve and other central banks, including the European Central Bank, remains crucial support.
A decline in US bond yields weakened the dollar across the board. Not even risk appetite capped the recovery in Treasuries. The 10-year yield fell from near 3% to 2.82% and the 30-year to 2.86%, the lowest in almost a week. Regarding economic data, the Existing Home Sales report showed a larger than expected decline in sales to 5.80 million. Fed’s Evens mentioned inflation is not going to fall back to 2% in 2023, and Fed’s Daly sees “unlikely” a decline to 2% in 2022.
In Europe, worries over the Ukraine war were partially offset by corporate results from the Eurozone Industrial Production report of February. Data showed an increase above expectations in the German Producer Price Index in March. Adding to the figures, comments from ECB officials suggesting a potential rate hike in the fourth quarter also helped the euro. Meanwhile, a new poll suggested a victory for French President Macron, who will debate with Le Pen later on Wednesday.
EUR/USD short-term technical outlook
The EUR/USD presents some positive signs after the recent recovery. The pair rose back to the 20-Simple Moving Average in the four-hour chart. The positive momentum will prevail while above 1.0825. A slide below that level would expose 1.0800, and a break lower should point to a test of the critical support of 1.0760.
The euro is not out of the woods yet, and a test of the 1.0760 area is still possible. If it consolidates below, an acceleration to the downside toward 1.0700 could occur. The mentioned area is the last defence to the March 2020 low at 1.0635.
The 1.0865 zone capped the recovery of the pair. Immediately above the latter, the 1.0895 emerges as the next barrier. If the euro continues to rise, the next level to watch is the key resistance at 1.0945: a break higher should strengthen the outlook for the shared currency, suggesting more gains ahead.
Support levels: 1.0825 1.0760 1.0700
Resistance levels: 1.0865 1.0890 1.0945
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Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
