EUR/USD Forecast: risk sentiment and inflation leading the way

Valeria Bednarik FXStreet

The EUR/USD pair fell to 1.1109, its lowest in two weeks, undermined by risk-negative news coming from Europe. Following an extremely quiet Monday with holidays in the US and the UK, headlines suggesting that Greece may default once again if creditors don’t agree on debt relief, making it more sustainable for the troubled country, spurred risk aversion early Asia, weighing on the common currency. Chances of an early election in Italy also weighed on the EUR, although the decline has been so far corrective, when considering the EUR/USD pair has barely corrected 100 pips from its 2017 high.

The EU will release its sentiment figures in a few minutes, but attention will center in inflation, Germany will release its May preliminary CPI figures, while the US will unveil its core PCE price index, Fed's favorite inflation measure. In both cases, inflation could determinate next monetary policies' steps, and therefore shake the pair.

The EUR/USD pair managed to bounce from the mentioned low, but remains now below the 1.1160 level, former low and immediate resistance. The bearish tone seen on previous updates has become more clear, although technically, the downward momentum has eased, given that technical indicators in the 4 hours chart, have bounced modestly from oversold readings, lacking now directional strength. In the same chart, the price is below a bearish 20 SMA, but still above bullish 100 and 200 SMAs, these last, indicating that the downward potential remains limited longer term.

The main support comes at 1.1075, May 18th low, the probable bearish target if the price extends below the mentioned daily low, followed by the 1.1030/40 price zone. Above 1.1160, the pair can advance towards the 1.1200 region, with gains beyond this last being unlikely for today.

View live chart of the 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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