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

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0573

Federal Reserve Chair Jerome Powell will discuss the economic outlook at the Economic Club of New York.
Treasury bond yields reached fresh multi-year highs but failed to underpin the US Dollar.
EUR/USD gains upward traction in the near term faces resistance ahead of 1.0600.

The EUR/USD pair keeps the range around 1.0550 on Thursday as investors try to assess risk-related headlines. On the one hand, geopolitical tensions in the Middle East keep escalating and boosting demand for safety. Government bond yields surged, with the United States (US) 10-year Treasury bond offering as much as 4.98% ahead of the US opening and the 2-year note yield peaking at 5.25%, a fresh multi-year high.

Still, the US Dollar cannot take advantage of surging yields ahead of Federal Reserve (Fed) Chair Jerome Powell's appearance before the Economic Club of New York. Powell will discuss the economic outlook and his words may affect financial markets. It is also worth noting that ever since the Fed suggested higher yields could offset the need for rate hikes to slow the economy on their own, the correlation between the USD and yields has broken. Besides, market players are concerned about the US fiscal deficit and growing auction sizes to found the country.

On the other, Asian and European stock markets trade in the red after tepid American earnings reports sent Wall Street sharply down on Wednesday. Equities are also receiving pressure from the latest developments between Israel and its neighbours. Israeli Prime Minister Benjamin Netanyahu said on Thursday that the conflict with Palestinian group Hamas will be a long war.

The Euro Zone macroeconomic calendar offered little of relevance. The EU published the August Current Account, which posted a seasonally adjusted surplus of €27.7 billion, improving from the previous €21 billion. The US reported that Initial Jobless Claims in the week ended October 13 printed at 198K, easing from 211K. Also, the Philadelphia Fed Survey came at -9 in October, missing expectations but improving from the previous -13.5. The country will publish September Existing Home Sales after Wall Street's opening.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair reflects the absence of clear directional strength. The pair seesaws around a bearish 20 Simple Moving Average (SMA) while the longer moving averages converge above the 1.0800 mark. Technical indicators remain stuck around their midlines, heading marginally higher amid the intraday advance but falling short of suggesting a bullish continuation.

In the near term, and according to the 4-hour chart, the risk skews to the upside. EUR/USD trades above its 20 and 100 SMAs, with the shorter one gaining upward momentum. The 200 SMA maintains its downward slope above the current level, while technical indicators head firmly north after crossing their midlines into positive territory. The pair has been meeting selling interest ahead of the 1.0600 threshold, still expected to limit advances ahead of Powell's words.

Support levels: 1.0545 1.0495 1.0450

Resistance levels: 1.0595 1.0640 1.0685

View Live Chart for 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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