EUR/USD Forecast: Limited bounce not enough to confirm additional gains

EUR/USD Current price: 1.0824

• The dismal market mood extended during Asian trading hours, underpinning the US Dollar.
• The United States downwardly revised its annualized growth to 1.3% in the first quarter.
• EUR/USD bounced from sub-1.0800, bullish potential limited in the near term.

The US Dollar maintained its sentiment-inspired momentum throughout the first half of the day, resulting in EUR/USD falling to 1.0787, its lowest in two weeks. As the market mood improved, the pair recovered above the 1.0800 threshold, but remains depressed at around 1.0820. Financial markets turned risk-averse following a batch of Federal Reserve (Fed) officials cooling down hopes for a soon-to-come rate cut and poor government bond auctions. Treasury yields surged to fresh multi-week highs on Wednesday, further supporting the USD.

Meanwhile, European indexes trade with modest gains, but that’s not enough for Wall Street. United States (US) indexes hover around their Wednesday closing levels ahead of the opening and seem poised to extend their slides.

Data-wise,  the Eurozone released the May Economic Sentiment Indicator, which improved by less than anticipated to 96 from 95.6 in April. Across the pond, the US released a revision of the Q1 Gross Domestic Product (GDP), which was downwardly revised to 1.3% from 1.6% as expected. At the same time, Initial Jobless Claims for the week ended May 24 increased to 219K, worse than the 218K expected. Finally, the preliminary estimate of April Wholesale Inventories increased by 0.2%, worse than the 0.1% decline anticipated. April Pending Home Sales and a couple of Fed officials will stand out in the American afternoon.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows it trades in the green, although at the lower end of its Wednesday range. It met buyers around a flat 200 Simple Moving Average (SMA) and is currently battling with converging 20 and 100 SMAs. The shorter one aims higher, suggesting increased buying interest. Technical indicators, in the meantime, picked up modestly after testing their midlines, not enough to confirm another leg higher but a sign of limited selling pressure.

Chances of a firmer recovery seem limited in the near term. The 4-hour chart shows the pair cannot overcome a flat 100 SMA, while the 20 SMA maintains its bearish slope above the longer one. Finally, technical indicators corrected from near oversold levels but lose upward momentum within negative levels.

Support levels: 1.0815 1.0780 1.0740

Resistance levels: 1.0910 1.0960 1.1000