EUR/USD Forecast: Struggling to extend gains despite persistent optimism

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0847

European Central Bank officials maintain a hawkish stance despite banking turmoil.
US President Joe Biden aims to change rules on midsize banks.
EUR/USD struggles to extend gains but retains its bullish tone in the near term.

The EUR/USD pair maintains positive momentum on Wednesday, posting gains for a third consecutive day. However, the advance is modest, with the pair unable to extend its advance beyond 1.0860. Nevertheless, financial markets remain optimistic, with substantial gains among stock markets leading the way. Government bond yields, on the other hand, eased a couple of basis points, helping to maintain the US Dollar on the back foot.

Data-wise, the macroeconomic calendar remains scarce. The European Central Bank (ECB) had a non-monetary policy meeting, which as usual, ended without a statement. ECB officials have been on the wires these days, supporting the case of further rate hikes, although with uneven views on the banking situation. On the one hand, Chief Economist Philip Lane said the central bank should continue hiking rates if banking tensions have no or a limited impact.

On the other hand, European Central Bank Governing Council member Peter Kazimir noted the ECB should not change its stance on rates, adding it could impose them more slowly amid genuine danger that banks will cut back on lending.

Across the pond, United States President Joe Biden would call the federal banking system to impose new rules on midsize banks following the collapse of SBV and Signature Bank. The US published MBA Mortgage Applications for the week ended March 24, which rose 2.9%, while later in the session, the country will release February Pending Home Sales.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.0840 price zone, retreating from an intraday peak of 1.0871 and partially losing its positive momentum, according to technical readings in the daily chart. The pair keeps trading well above a long-term relevant static support at 1.0745, the 61.8% retracement of the 2022 yearly decline. EUR/USD also holds above bullish moving averages, although technical indicators have turned marginally lower within positive levels.

In the near term and according to the 4-hour chart, bulls seem to retain control. Technical indicators stand well above their midlines and with modest upward slopes. Furthermore, the pair comfortably consolidates above its moving averages, with the 20 Simple Moving Average (SMA) directionless at around 1.0800. A clear downward extension below the latter should lead to a test of the aforementioned Fibonacci support, while further losses are unlikely at the time being.

Support levels: 1.0790 1.0745 1.0700

Resistance levels: 1.0860 1.0910 1.0950

View Live Chart for 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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