EUR/USD Forecast: Prospects look promising, but one thing can ruin the rally

EUR/USD is trading close to 1.1385, holding onto the double-top that turned into support at 1.1372. There are quite a few factors moving the pair, with a tendency to the upside.

Powell: Fed Chair Jerome Powell repeated his message of patience on interest rate hikes. The dovish tones were not surprising but still weighed on the US Dollar. He characterized GDP growth as strong in 2018 and solid in 2019, a slight tilt to the downside.

After testifying to a Senate committee, the Fed Chair will face lawmakers in the House today. He will likely remain on the script. 

Brexit delay? UK PM Theresa May boxed to pressure from her pro-Remain peers in the cabinet and agreed to open the door to a delay of Brexit. Parliament will now vote on her deal on March 12th, then on preventing a no-deal Brexit on the following day, and finally on a delay on March 14th.

While the potential three-month delay is unlikely to help to solve the controversial issue of the Irish backstop, markets are relieved. The pound rallied, and the euro also enjoyed the optimism. 

India-Pakistan escalation: After India bombed an alleged terrorist camp in Pakistan, Pakistan reported that it downed two Indian planes, capturing one of the pilots. The two South-Asian nuclear powers are experiencing the worst escalation in decades, and the news triggered a risk-off atmosphere.

China called on both sides to calm down. Sooting words can help EUR/USD recover.

Trump-Kim 2.0: US President Donald Trump meets  North Korean leader Kim Jong-un in Vietnam. The second summit between the two carries low expectations as negotiations on denuclearization remain stuck. Any surprising accord may boost risk sentiment. 

Apart from these themes, Germany's central bank President Jens Weidmann will speak later on. US Pending Home Sales and Factory Orders may also provide some action.

Tuesday's data was mixed. The Conference Board's Consumer Confidence gauge beat expectations with a score of 131.4 while Housing Starts missed with 1.08 million annualized, reflecting the weakness of the housing sector.

All in all, the mood is positive on Powell's dovishness and Brexit, with further gains on the cards. However, the escalation between India and Pakistan may ruin the rally.

EUR/USD Technical Analysis

EUR/USD broke above the double-top of 1.1372 that capped it in February and hit a high of 1.1403, the highest in three weeks. A pullback saw the pair holding above the previous cap, a bullish sign.

Also, EUR/USD is now above the 200 Simple Moving Average on the four-hour chart, in addition to topping the 50 SMA. Momentum is positive, and the Relative Strength Index is below 70, showing the pair has room to the upside.

1.1390 was a swing low in late January and is fought upon now. 1.1403 mentioned earlier is critical to unleashing further gains. 1.1425 was a support line in January and currently serves as resistance. 1.1435 and 1.1450 follow.

1.1372 is now significant support, followed by 1.1345 which was a low point on Tuesday. 1.1330 and 1.1315 were recent troughs in the past few days.