EUR/USD Price Forecast: Buyers struggling to take control

EUR/USD Current price: 1.0387

• Talks about an agreement between Russia and Ukraine underpinned the mood.
• The US Dollar is under mild pressure despite expectations of a more hawkish Fed.
• EUR/USD eases from a fresh weekly high, additional slides likely once below 1.0350.

The EUR/USD pair extended its weekly advance to 1.0439 on Thursday, yet piercing the 1.0400 mark ahead of the United States (US) opening. The improved market mood pushes investors away from the US Dollar (USD) despite mounting speculation that the Federal Reserve (Fed) will keep the monetary policy tight for longer than previously anticipated.

The release of the US January Consumer Price Index (CPI) gave the USD a temporal boost on Wednesday, as inflation was hotter than anticipated, meaning there’s less room for interest rate cuts in the foreseeable future. Fed Chairman Jerome Powell’s testimony before Congress pointed in the same direction.

Nevertheless, financial markets turned optimistic, partially due to renewed hopes that the war between Russia and Ukraine would soon end with the help of the US. Other than that, the firmer tone of Asian and European equities underpinned the positive sentiment and helped Wall Street’s futures remain afloat.

Data-wise, the European Union (EU) released December Industrial Production, which fell by 1.1% in the month, worse than the 0.6% slide anticipated by market participants. On a yearly basis, Industrial Production was down 2%, better than the -3.1% expected.

The US calendar includes Initial Jobless Claims for the week ended February 7 and January Producer Price Index (PPI) figures. Given the recent CPI release for the same period, the PPI report has little chance of impacting the USD.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows it has traded within wide intraday ranges since Wednesday but may make little progress. It is around 1.0390, barely 10 pips above its previous daily close. The same chart shows it keeps battling to overcome a mildly bullish 20 Simple Moving Average (SMA) around the current level, while the longer moving averages head firmly south far above the 1.0500 mark, indicating sellers retain control. Additionally, technical indicators offer uneven perspectives. On the one hand, the Momentum indicator aims south within negative levels. On the other hand, the Relative Strength Index (RSI) indicator consolidates around its midline. Overall, the risk skews to the downside, albeit the momentum is missing.

The near-term picture shows sellers are willing to add on spikes, yet buyers are still there. In the 4-hour chart, the pair managed to advance beyond all its moving averages, although it currently struggles to hold above a flat 100 SMA. A bullish 20 SMA, in the meantime, provides support at around 1.0350. Finally, technical indicators turned sharply lower yet remain within positive levels. A break through the mentioned 1.0350 price zone should favor a steeper leg lower in the upcoming sessions.

Support levels:  1.0350 1.0300 1.0260  

Resistance levels: 1.0440 1.0480 1.0530