EUR/USD Forecast: Immediately to the upside emerges 1.0980

The US Dollar (USD) traded marginally on the upside on Tuesday, putting the risk-related sector under some mild downside pressure and motivating EUR/USD to recede from earlier tops north of 1.0900 the figure, or multi-week tops.

The pair reversed three consecutive daily advances following the Greenback's fresh upward trend and the continuation of the decline in US yields across the board.

Meanwhile, recent hawkish statements from Fed officials have fueled speculation that the Federal Reserve (Fed) may retain its tight posture for a longer period of time than predicted. However, disheartening US JOLTs Job Opening prints appear to have underpinned an interest rate reduction in November.

Indeed, the CME Group's FedWatch Tool predicts a roughly 80% chance of lower interest rates by the November 7 meeting.

Despite stronger inflation estimates in Germany and the rest of the eurozone in May, the European Central Bank (ECB) is expected to decrease interest rates at its next meeting on June 6. Doubts remain, however, when it comes to considering prospective cutbacks after the summer.

Looking ahead, the Eurozone's incipient recovery in some economic fundamentals, together with the US economy's loss of momentum, reinforces the shrinking of the monetary policy difference between the Fed and the ECB, supporting a comeback in EUR/USD.

However, in the long run, given the increasing possibility that the ECB would cut rates before the Fed, additional EUR/USD depreciation should be expected in the coming months.

EUR/USD daily chart

EUR/USD short-term technical outlook

If bulls retain control, EUR/USD may test the June high of 1.0916 (June 4), then the March top of 1.0981 (March 8) and the weekly peak of 1.0998 (January 11), all before reaching the important 1.1000 level.

The resumption of the bearish tone, on the other hand, might push the pair below the weekly low of 1.0788 (May 30), which is supported by the 200-day SMA. The fall below this area might push the spot to the May low of 1.0649 (May 1), ahead of the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is breached, the pair may head for the weekly low of 1.0495 (October 13, 2023) or the 2023 bottom of 1.0448 (October

So far, the 4-hour chart shows a small knee-jerk amidst the current upward bias. The 55-SMA at 1.0847 is the next downward barrier, followed by 1.0788 and 1.0781. On the upside, 1.0916 comes first ahead of 1.0942. The relative strength index (RSI) surged to around 56.