EUR/USD Forecast: Optimism weighs on US Dollar demand

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0548

The European Central Bank left the main rates unchanged, as expected.
The United States Q3 Gross Domestic Product beat expectations by printing 4.9%.
EUR/USD keeps pressuring weekly highs, with lower lows still in sight.

The EUR/USD pair slid throughout the first half of the day, reaching fresh weekly lows in the 1.0530 region ahead of first-tier events. The US Dollar gained on the back of poor earnings reports weighing on high-yielding stocks.

The European Central Bank (ECB) announced its monetary policy decision and maintained interest rates unchanged, as widely anticipated by financial markets, with the Deposit Facility Rate steady at 4%. Generally speaking, the central bank was dovish. Policymakers noted that current rates are sufficiently restrictive while underlying inflation continues to ease. Still, the central bank added that rate levels "must" be maintained for a reasonably long time.

Across the pond, the United States (US) published the preliminary estimate of the Q3 Gross Domestic Product (GDP), which beat expectations. The economy grew at an annualized pace of 4.9% between July and September, much better than the previous 2.1% or the 4.2% expected. Substantial growth goes against the Federal Reserve's (Fed) wishes for below-trend growth to tame inflation. The US Dollar ticked higher with the news, as at the same time, the country published Initial Jobless Claims for the week ended October 20, up to 210K and still signaling a tight labor market. However, the upbeat figures also boost the sentiment, limiting USD gains and as stock markets resume their advances.

EUR/USD short-term technical outlook

The EUR/USD pair bounced from a fresh intraday low of 1.0521 ahead of Wall Street's opening and as ECB's President Christine Lagarde speaks. The daily chart shows the risk skews to the downside, as the pair remains in the red and below a flat 20 Simple Moving Average (SMA) at around 1.0560. Technical indicators, in the meantime, head firmly south, crossing their midlines into negative territory and reflecting bears' strength.

In the near term, and according to the 4-hour chart, EUR/USD is oversold, yet the upside seems limited. The pair develops below all its moving averages, which lack clear directional strength. At the same time, technical indicators head marginally lower near oversold readings, showing modest signs of downward exhaustion. Renewed selling interest below 1.0520 should open the door for a steeper decline toward the year-low at 1.0447.

Support levels: 1.0520 1.0485 1.0440

Resistance levels: 1.0560 1.0600 1.0640

View Live Chart for EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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