EUR/USD Forecast: US Dollar soars as markets turn risk-averse

EUR/USD Current price: 1.0685

• The US Q1 Gross Domestic Product missed expectations, triggering risk aversion.
• The yield on the 2-year Treasury note surged beyond 5.0%.
• EUR/USD is on its way to retesting the year low at 1.0600.

The EUR/USD pair surged to 1.0729 during European trading hours, retaining gains and developing above the 1.0700 threshold ahead of the critical United States (US) Gross Domestic Product (GDP) report. Ahead of Wall Street’s opening, the Bureau of Economic Analysis (BEA) reported the economy grew at an annualized pace of 1.6% in the three months to March, missing the 2.5% expected and well below the previous 3.4%. Furthermore,  consumer prices increased 3.4%, well above the prior quarter’s 1.8% advance.

As a result, financial markets entered risk-aversion mode. The US Dollar surged as Wall Street plunged, while government bond yields soared. The 2-year Treasury note yields 5.02%, and the USD runs alongside. Inflation concerns are back on the table, and that could delay the Federal Reserve’s decision to go for rate cuts despite tepid growth. Bad news all over the place.

EUR/USD short-term technical outlook

The EUR/USD pair trades around 1.0690 and keeps pressuring intraday lows, in line with another leg south. The daily chart shows the pair met sellers around a mildly bearish 20 Simple Moving Average (SMA), which maintains its firmly bearish slope below the longer ones. At the same time, technical indicators head lower below their midlines, with moderated strength, but still suggesting bears are in control.

In the near term, and according to the 4-hour chart, the pair trades between moving averages. A bearish 100 SMA caps advances, while a mildly bullish 20 SMA acts as support. At the same time, technical indicators have turned lower and are currently pressuring their midlines from above, just shy of confirming a bearish extension. Once below the next support level at 1.0645, the pair will be on its way to pierce the 1.0600 threshold.

Support levels: 1.0645 1.0600 1.0570  

Resistance levels: 1.0700 1.0740 1.0785