EUR/USD Forecast: US Dollar firmer ahead of Powell's words

EUR/USD Current Price: 1.0706

• Market players are waiting for Federal Reserve Chair Jerome Powell’s words.
• German Industrial Production plunged in December, weighing on the Euro.
• EUR/USD struggling to retain the 1.0700 threshold, the risk of a steeper decline increased.

The EUR/USD pair extended its slide to a fresh three-week low at 1.0969, as demand for the US Dollar prevails ahead of the United State Federal Reserve (Fed) President Jerome Powell's speech. Market participants are still pricing in the latest central bank decisions and the solid employment report published last Friday, both suggesting the Federal Reserve would maintain the tightening course. Policymakers hinted at a potential higher-than-anticipated terminal rate, weighing on chances of a rate cut by year-end. Chair Powell is due to participate in a moderated discussion at the Economic Club of Washington DC after Wall Street’s opening and may or may not make comments on monetary policy.

Stock markets are in a better shape on Tuesday, as most Asian and European indexes stand in the green, helped by earnings reports. US indexes, however, are showing little action ahead of the opening and hover around Monday closing levels. Additionally, US Treasury yields hold on to their recent gains, pressuring multi-week highs and providing support to the US Dollar.

During the European morning, Germany published December Industrial Production, which fell 3.1% in the month, and 3.9% from a year earlier, much worse than anticipated. The United States will release the December Goods and Services Trade Balance, expected to post a deficit of $68.5 billion.

EUR/USD short-term technical outlook

The EUR/USD pair remained below the 1.0745 level, meeting sellers around it in attempts to recover ground. 1.0745 is the 61.8% Fibonacci retracement of the 2022 slump, and the fact the pair is currently sliding below it is quite an alarm for bulls. Technical readings in the daily chart favor a downward extension, although the momentum is limited. Indicators have crossed their midlines into negative levels but lost their bearish strength. At the same time, the 20 Simple Moving Average (SMA) is flat at around 1.0840, providing dynamic resistance. Finally, the 100 and 200 SMA converge at around 1.0320, with the shorter crossing, the longer one.

In the near term, and according to the 4-hour chart, bears are in control of the pair. Technical indicators resumed their declines after correcting oversold conditions, with the RSI currently at around 29 and without signs of downward exhaustion. Meanwhile, the 20 SMA heads firmly south, having already crossed below the 100 SMA, far above the current level. The 200 SMA, in the meantime, heads nowhere a few pips above the aforementioned Fibonacci level. A steeper decline could be expected on a break below 1.0660, now the immediate support level.

Support levels: 1.0660 1.0615 1.0570

Resistance levels: 1.0745 1.0790 1.0840

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