EUR/USD Forecast: May continue to drift lower, possibly towards 1.0700 mark

• EUR/USD came under some fresh selling pressure on Wednesday
• The EU finance ministers failed to agree on coronavirus package.
• A modest intraday USD pullback helped limit any deeper losses.

The EUR/USD pair came under some fresh selling pressure on Wednesday, eroding a part of the previous day's goodish intraday positive move and was being weighed down by a combination of factors. The US dollar was back in demand through the first half of the day amid disappointing news surrounding the coronavirus pandemic. Meanwhile, the European Union (EU) Finance Ministers failed to reach an agreement on coordinated coronavirus economic response and undermined the shared currency. The common currency was further pressured after a group of five leading economic institutions in Germany forecasted a severe recession, with a contraction of 9.8% in the second quarter of 2020.

The pair touched an intraday low level of 1.0830, albeit managed to find some support at lower levels as the greenback struggled to preserve its early gains. Investors largely ignored the latest update, which showed that New York State recorded its highest death toll on Wednesday, rather turned optimistic on forecasts that the pandemic peak could come soon. This was evident from a strong rally in the US equity markets and dented the USD's safe-haven status. The release of the FOMC minutes did little to influence the USD price dynamics or provide any meaningful impetus to the major. The pair, however, failed to capitalize on some renewed weakness and ended in the red, marking its seventh day of a negative move in the previous eight.

Given that the EU finance ministers are expected to meet again this Thursday, the pair held steady and was seen oscillating in a narrow trading band through the Asian session. Later during the early North-American session, attention will shift to the US economic docket, which highlights the release of US initial weekly jobless claims. This along with March PPI figures might influence the USD price dynamics and provide some impetus. Apart from this, fresh developments surrounding the coronavirus saga will further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, nothing seems to have changed much for the pair and the near-term set-up remains tilted in favour of bearish trades. However, it will be prudent to wait for a sustained weakness below the 1.0775-70 region before positioning for any further near-term depreciating move. Below the mentioned support, the pair is likely to accelerate the fall towards challenging the 1.0700 round-figure mark before eventually dropping to test YTD lows, around the 1.0635 area.

On the flip side, the 1.0900 round-figure mark might continue to act as an immediate resistance, above which a bout of a short-covering move has the potential to lift the pair further towards 50-day SMA, around the 1.0970-75 region. The momentum could further get extended towards the key 1.10 psychological mark en-route the very important 200-day SMA, around the 1.1060-65 region.