EUR/USD Forecast: Position adjustments ahead of Powell’s testimony
EUR/USD Current Price: 1.0919
- European Central Bank officials hinted at multiple rate hikes in the near future.
- Federal Reserve Chairman Jerome Powell will testify before Congress this week.
- EUR/USD eased from its recent high, but there are no signs of a steeper near-term decline.
The EUR/USD pair trades in the 1.0910 price zone, posting modest losses in a quiet Monday. Following the central banks' frenzy from last week, speculative interest became optimistic, as the end of the tightening cycle is close enough to help avoid potential recessions, while inflation keeps easing from record highs achieved mid-2022.
The US Dollar gained amid position adjustments after it sold off last week, although it remains intrinsically weak, given the continued appetite for riskier assets.
On Monday, the Eurozone macroeconomic calendar had little to offer, although European Central Bank (ECB) members hit the wires, maintaining the stakes high for additional rate hikes. Executive Board Member Philip R. Lane said another hike in July seems appropriate, while September's decision will depend on data. Meanwhile, Isabel Schnabel expressed concerns about the central bank underestimating inflation in the past, noting the interest rate path should have been steeper and suggesting they may continue to hike rates this year.
On Tuesday, the EU will publish the April Current Account and Construction Output, while the United States (US) will release May Building Permits and Housing Starts. It is worth adding that Federal Reserve (Fed) Chairman Jerome Powell will testify before Congress on Wednesday and could provide fresh clues on the future of monetary policy.
EUR/USD short-term technical outlook
The EUR/USD pair eased modestly from a monthly high of 1.0970, with the bearish potential limited, according to technical readings in the daily chart. The pair holds well above its moving averages, although the 20 Simple Moving Average (SMA) has lost its bullish slope and remains below a flat 100 SMA. The 200 SMA, however, extended its upward slope far below the current level. Meanwhile, technical indicators ease from their recent highs with limited bearish strength and are still well above their midlines, suggesting the absence of selling interest.
The 4-hour chart suggests the slide from the aforementioned high is a mere correction. EUR/USD holds above a bullish 20 SMA, which advances far above the longer ones while maintaining its upward slope. The longer moving averages lack directional strength but remain far below the shorter one. Finally, technical indicators have retreated from overbought readings, with the Momentum still heading south but the Relative Strength Index (RSI) now consolidating at around 61. The decline could accelerate if the pair slides below 1.0890, the immediate support level.
Support levels: 1.0890 1.0850 1.0810
Resistance levels: 1.0945 1.0995 1.1040
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.
