EUR/USD Forecast: Euro rises above 20-day SMA, looks at 1.0800
- The EUR/USD pair finally moved away from the 1.0700 area.
- A weaker US Dollar boosted the pair to the upside.
- US Jobless Claims data, which came in higher than expected, triggered a USD slide.
The EUR/USD had its best performance in weeks on Thursday on the back of a weaker US Dollar. The Greenback fell across the board following softer employment data from the US, ahead of next week's FOMC meeting. The outlook points to further gains for the pair in the near term.
The downward revisions in Euro area Q1 GDP did not affect the Euro. Growth was revised from a 0.1% expansion QoQ to a 0.1% QoQ contraction. Performance across countries was mixed, with Italy and Spain showing a 0.5% expansion, France a 0.2%, and Germany a contraction of 0.3%. The numbers do not alter expectations for next week's European Central Bank meeting, and a 25 basis points interest-rate hike is priced in. The updated macroeconomic forecasts could probably be more important than the rate decision.
The rally in EUR/USD on Thursday was driven by a weaker US Dollar, risk appetite, and technical factors. In the US, Initial Jobless Claims rose unexpectedly to the highest level since October 2021. These numbers continue to ease hawkish expectations from the Federal Reserve. The key report, however, will be next Tuesday's release of the May Consumer Price Index, one day before the FOMC decides on interest rates.
Wall Street cheered the negative employment numbers. Risk appetite added extra weight to the US Dollar. On Friday, the highlight of the economic calendar will be a speech from ECB's vice-president Luis de Guindos. Ahead of the Asian session, the US Dollar continues to look weak and could extend losses after some consolidation. A deterioration in market sentiment would limit the upside and could favor a sharp correction.
EUR/USD short-term technical outlook
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The EUR/USD posted its first daily close above the 20-day Simple Moving Average (SMA) in a month. The line is currently turning flat at 1.0762. If the Euro holds above, more gains seem likely for the pair. The next resistance is seen at the psychological 1.0800 area, where also the 100-day SMA is located.
On the 4-hour chart, the pair is clearly bullish, with the price above key moving averages and also above 1.0760. Technical indicators show overbought conditions, with the Relative Strength Index (RSI) around 70, suggesting some consolidation before a potential move higher. The bias in the short term has turned bullish. A decline under 1.0720 could negate the bias, exposing 1.0700 and 1.0680.
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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.
