EUR/USD Forecast: Recent corrective bounce might have already run out of the steam

The shared currency snapped six consecutive days of a winning streak and started the week on a downbeat note against its American counterpart. The EUR/USD pair lost over 130 pips from daily tops around the 1.1150 region and erased a major part of the previous day's gains to near two-week tops. As investors digested the Fed's unlimited quantitative easing program, the ever-increasing number of confirmed coronavirus cases across the world forced investors to take refuge in traditional safe-haven currencies and eased the recent bearish pressure surrounding the US dollar.

Apart from a modest pickup in the greenback demand, the pair was further pressurized by weaker Eurozone economic data, showing that the Consumer Confidence dropped to -11.6 in March from -6.6 previous and the broader Economic Sentiment Indicator fell to 94.5 from 103.4 recorded in February. Meanwhile, the preliminary estimate of the harmonized German inflation came in to show a 1.3% YoY rise in March. From the US, Pending Home Sales figures for February surprised to the upside, albeit was largely negated by a slump in Dallas Fed Manufacturing Business Index for March and did little to provide any meaningful impetus.

The pair remained depressed through the Asian session on Tuesday but showed some resilience below the key 1.10 psychological mark amid a goodish recovery in the global risk sentiment. Against the backdrop of a massive $2.2 trillion US economic stimulus package, investors' confidence got an additional boost from a sharp rebound in Chinese manufacturing activity. In fact, the official Chinese Manufacturing PMI surpassed even the most optimistic estimates and jumped back in the expansion territory in March. Adding to the optimism, China's Services PMI also bettered market expectations and moved back above the 50 levels.

Market participants now look forward to the flash estimate of the Eurozone consumer inflation figures for a fresh impetus. The US economic docket highlights the release of Chicago PMI and Conference Board's Consumer Confidence Index, which might further contribute towards producing some meaningful trading opportunities later during the early North-American session. In addition to this, developments surrounding the coronavirus saga might continue to drive the broader market risk sentiment and infuse some volatility across the FX market.

Short-term technical outlook

From a technical perspective, the pair's inability to find to acceptance above the very important 200-day SMA and a subsequent pullback from the 61.8% Fibonacci of the 1.1497-1.0636 slide suggest that the recent bounce from multi-year lows might have already run out of the steam. However, it will be prudent to wait for a sustained weakness below 38.2% Fibo. level, around the 1.0965-60 region, before traders start positioning for the resumption of the prior/well-established bearish trend. The pair then might accelerate the slide towards the 1.0900 round-figure mark en-route 23.6% Fibo. near the 1.0840 region.

On the flip side, the 1.1065 region (50% Fibo.) now seems to act as immediate resistance and is followed by the 1.1095-1.1100 region (200-DMA). A sustained move beyond the mentioned barriers might lift the pair back towards the 1.1145-50 supply zone (nearing 61.8% Fibo.), which if cleared should pave the way for a further near-term appreciating move. Bulls might then aim towards reclaiming the 1.1200 mark and head towards testing the next major hurdle near the 1.1225 zone.