EUR/USD Forecast: Relief rally? US data could slam the pair back down, levels

More than a dead-cat bounce, but still not out of the woods –  EUR/USD is nearly 90 pips off Friday's low, benefiting from the extended unwinding of last week's dollar long positions.

The greenback fell on Friday in the aftermath of the mixed Nonfarm Payrolls report, which showed a robust 850,000 jobs gain in America, but a only a moderate advance in wages, 3.6% YoY.

Can this greenback grinding last? Other currencies' gain against the dollar may come to an end as Americans return from their long Independence Day weekend and as new economic data is published. The ISM Services Purchasing Managers' Index is set to show a moderate decrease from 64 to 63.5 in the headline figure, a number still reflecting robust growth.

As the NFP is already in the rearview mirror, the focus could shift to PMI's Prices Paid component. This gauge of inflation is projected to decline, yet the all-time high recorded in the ISM Manufacturing PMI suggests there is room for an upside surprise. That could trigger fresh dollar strength.

ISM Services PMI Preview: Why the inflation component could trigger a dollar rebound

Over in the old continent, there are fewer reasons to be cheerful. The Delta variant of COVID-19 continues reverberating through Spain and Portugal, and its highly contagious nature suggests it could spread further afield. Germany, Europe's largest economy, has removed restrictions from visits originating in the UK, where the strain is prevalent. 

Data from the "locomotive" of the eurozone could also weigh on sentiment. German Factory Orders tumbled by 3.7% in May, contrary to expectations for a rise. The focus shifts to the ZEW Economic Sentiment statistics for July, which are projected to edge off the highs. 

All in all, the rally may run out of fuel sooner rather than later.

EUR/USD Technical Analysis

Euro/dollar has tackled the 50 Simple Moving Average on the four-hour chart and a break above that level could open the door to further gains. Moreover, momentum has turned positive. On the other hand, the currency pair trades below the 100 and 200 SMAs. Overall, bulls are improving their positions, but bears are still lurking in the woods. 

Beyond the daily high of 1.1895, some resistance awaits at 1.1910, which served as support in late June. It is followed by 1.1950, which capped the pair earlier last month, and by 1.1975.

Some support is at 1.1880, which resisted a recovery attempt last week, and then by 1.1835, a support line from the same time. The post-NFP trough of 1.1808 is next. 

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