EUR/USD Forecast: US Dollar eases amid a better market mood

EUR/USD Current price: 1.0917

• Cooling hopes for additional rate hikes in Japan help stabilize the market mood.
• United States Treasury yields extend their recovery after the latest collapse.
• EUR/USD is neutral-to-bearish in the near term, critical support at 1.0890.

The EUR/USD pair stabilized above the 1.0900 mark on Wednesday as the market mood continues to improve. The better sentiment partially resulted from comments from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, whose dovish words poured cold water on Asian markets. Uchida said the BoJ would not raise interest rates if global markets remained unstable, cooling down the chance of a near-term hike. The Japanese Yen (JPY) soared after the BoJ hiked rates last week by 15 basis points (bps), and Governor Kazuo Ueda stated afterwards that interest rates are still at a “very low” level.

Also, government bond yields are recovering after collapsing at the beginning of the month. The United States (US) 10-year Treasury note currently offers 3.93%, while the 2-year note yields roughly 4.0%. As a result, global stocks trade with a better tone, weighing unevenly on the US Dollar.

Meanwhile, the macroeconomic calendar remains scarce. Germany published the June Trade Balance, which posted a surplus of €20.4 billion, missing expectations. Also, industrial Production rose 1.4% in the same month from May but edged 4.1% lower from a year earlier. The US released MBA Mortgage Applications for the week ended August 2, which rose 6.9%. The country will later publish the June Consumer Credit Change.

EUR/USD short-term technical outlook

Heading into Wall Street’s opening, the Euro is among the USD's weakest rivals. The daily chart for the EUR/USD pair shows it trades in the red, at the lower end of Tuesday’s range. Furthermore, the Momentum indicator struggles to remain within positive levels, currently neutral, while the Relative Strength Index (RSI) indicator heads lower above its 50 level. On a positive note, the pair keeps trading well above its moving averages, with the 20 Simple Moving Average (SMA) maintaining its bullish slope at around 1.0875.

In the near term, and according to the 4-hour chart, the pair is neutral-to-bearish. EUR/USD trades a handful of pips below a firmly bullish 20 SMA while far above directionless 100 and 200 SMAs. Technical indicators, however, head south within neutral levels, with limited momentum but still pointing to another leg lower. The pair needs to break with volume the 1.0890 support level to extend its slide in the upcoming sessions.

Support levels: 1.0890 1.0845 1.0800

Resistance levels: 1.0950 1.1005 1.1045