EUR/USD Forecast: US Dollar soars amid signs of economic health

EUR/USD Current price: 1.0953

• Upbeat United States macroeconomic data pushed the US Dollar higher across the FX board.
• Stock markets rally with US news as they spooked recession-related concerns.
• EUR/USD trades around 1.0950 with a strong bearish momentum, aims to extend the slide.

The EUR/USD pair held above 1.1000 throughout the first half of Thursday, and once again, it was confined to a tight intraday range. The pair peaked at 1.1046 on Wednesday, following the release of the United States (US) July Consumer Price Index (CPI). The data showed inflationary pressures ticked lower at the beginning of the third quarter despite the index holding above the Federal Reserve (Fed) goal of around 2%.

Financial markets welcomed the news, as it somehow confirmed an upcoming interest rate cut. Stocks advanced while government bond yields remained stable. The US Dollar, however, lost some modest ground, as the figures were far from changing the pre-release market’s view.

The European macroeconomic calendar had nothing relevant to offer, but the US just released a batch of relevant data. July Retail Sales increased 1%, beating the 0.3% advance anticipated by market participants. Initial Jobless Claims for the week ended August 9 were up by 227K, better than the 235K expected. Finally, regional manufacturing indexes posted negative outcomes in August but fell short of surprising.

The US Dollar surged alongside Wall Street’s futures with the news, as the figures spooked the ghost of a recession while still supporting a Fed rate cut in September.

EUR/USD short-term technical outlook

The EUR/USD pair trades near the 1.0950 level, and the daily chart shows that the bearish momentum has increased. Technical indicators retreated sharply from near overbought readings, maintaining firmly bearish downward slopes. Still, the pair keeps trading above all its moving averages, with the 20 Simple Moving Average (SMA) heading north at around 1.0890.

In the near term, and according to the 4-hour chart, the bearish case is even stronger. Technical indicators approach their midlines almost vertically, easing from extreme readings and poised to extend their slides. At the same time, the pair has fallen below its 20 SMA, which now acts as near-term resistance at around 1.0970.

Support levels: 1.0950 1.0900 1.0860

Resistance levels: 1.0970 1.1005 1.1045