EUR/USD Forecast: Euro with scope to extend the rebound, US data crucial

The US Dollar corrects lower but still indicates an upward bias.
US jobs data comes in below expectations, with more numbers ahead including Jobless Claims and NFP.
The EUR/USD has some scope to extend the recovery, potentially facing increased resistance near 1.0560.

Matías Salord FXStreet

The Euro recovered from its lowest level in almost a year against the US Dollar but is struggling to hold above 1.0500. Despite the rebound, it remains under pressure, with the trend favoring the Dollar.

The sell-off in government bonds is making investors nervous. The German 10-year yield rose to 3% for the first time since 2011, while the US Treasury yield peaked at 4.88% before pulling back. Higher yields coupled with slowing inflation mean that real yields are soaring.

Data from the Eurozone showed that the Producer Price Index (PPI) rose 0.6% in August, matching expectations, while the annual rate deepened into negative territory from -7.6% to -11.5%. Retail Sales in the Eurozone contracted by 1.2% in August, a reading worse than market forecasts of a 0.3% slide.

European Central Bank President (ECB) Christine Lagarde reiterated that interest rates would remain at sufficiently restrictive levels for as long as necessary. Markets do not anticipate another rate hike, and comments from ECB officials have become a non-event for the time being. On Thursday, Germany will report trade data.

The US Dollar Index pulled back on Wednesday, but the upward trend remains intact, and fundamental factors still favor the Dollar. The soft ADP report boosted the correction, and incoming employment data, including Jobless Claims on Thursday and Nonfarm Payrolls on Friday, will be critical.

EUR/USD short-term technical outlook

Despite the rebound, the Euro is not out of the woods. The correction could extend without posing a significant threat to the dominant trend. On the daily chart, the Euro is trading well below the 20-day Simple Moving Average (SMA) and within a downtrend channel. A close above 1.0660 could change the short-term perspective to neutral.

On the 4-hour chart, there is some potential for an upside extension in EUR/USD, especially if it remains above the 20-SMA at 1.0505. The area around 1.0555 represents immediate resistance that could attract sellers, followed by an intermediate downtrend line at 1.0570. A decline below 1.0480 would expose recent lows at 1.0450. If this level is breached, the downside could find support at 1.0430, which is the lower boundary of the channel.

View Live Chart for the EUR/USD

Premium

You have reached your limit of 3 free articles for this month.

Start your subscription and get access to all our original articles.

Subscribe to Premium Sign In

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.

EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted

EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions

Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.