EUR/USD Forecast: Sellers gain ground despite a better market mood

EUR/USD Current Price: 1.0741

• Financial markets still believe the US Federal Reserve would cut rates by year-end.
• Stocks trade with a positive tone amid Powell's optimistic words.
• EUR/USD is at risk of falling in the near term, particularly if it loses the 1.0700 mark again.

The EUR/USD pair hovers around 1.0740 on Wednesday, consolidating after Tuesday's Federal Reserve (Fed) chief Jerome Powell turmoil in markets. The head of the American central bank participated in a moderated discussion at the Economic Club of Washington, DC, providing some interesting headlines.

Chairman Powell pretty much repeated what he said last week following the FOMC monetary policy decision, noting that the US central bank still has more to do with rate hikes, although he reiterated the disinflationary process has begun. Stocks rallied as an initial reaction, then plummeted to fresh lows, to finally recover and end the day in the green. Indexes reflected investors' doubts about Fed's path through 2023. The upbeat tone of equities reflects investors' belief that the central bank could cut rates by the end of the year.

Asian stock markets struggled for direction, but most indexes stayed in the green, leading to gains among their European counterparts. Wall Street futures, on the other hand, hover around Tuesday's closing levels.

The macroeconomic calendar has no relevant data scheduled for today. The United States released MBA Mortgage Applications for the week ended February 3, which increased by 7.4%. A couple of Federal Reserve officials are scheduled to speak during the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair is stuck around a critical Fibonacci level, the 61.8% retracement of the 2022 decline at 1.0745. The pair is neutral-to-bearish, as it continues to develop below a flat 20 Simple Moving Average (SMA), currently at 1.0840. At the same time, the 100 SMA advances modestly above the 200 SMA, both in the 1.0320 price zone. Finally, technical indicators have turned flat right below their midlines, reflecting the absence of directional strength.

In the near term, and according to the 4-hour chart, the risk skews to the downside. EUR/USD develops below all of its moving averages, with the 20 SMA heading south almost vertically and about to cross below the 200 SMA both in the 1.0760 area. The Momentum indicator is retreating from its 100 level, while the Relative Strength Index turned marginally lower at around 42, anticipating another leg south.

Support levels: 1.0700 1.0660 1.0615  

Resistance levels: 1.0790 1.0840 1.0890

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