EUR/USD is trading close to 1.0800, sustaining its bounce in the European session. The US Dollar is correcting across the board amid a better market mood. ECB President Lagarde’s remarks aid the EUR/USD recovery. All eyes remain on Fed ‘Powell’s speech.
From a technical perspective, the overnight breakdown and acceptance below the 100-day Simple Moving Average (SMA) for the first time since November 2022 could be seen as a fresh trigger for bearish traders. The said support breakpoint, around the 1.0800 round-figure mark, coincided with the 50% Fibonacci retracement level of the March-May rally and should now act as a pivotal point. Meanwhile, oscillators on the daily chart are still far from being in the oversold zone and add credence to the negative outlook.
That said, any further decline is more likely to find some support near the 61.8% Fibo. level, around the 1.0730-1.0725 region. Some follow-through selling will reaffirm the bearish bias and drag the EUR/USD pair below the 1.0700 mark, towards the next relevant support near the 1.0675-1.0670 horizontal zone. Spot prices could slide further towards the 1.0635 region before eventually dropping to test the 1.0600 round figure.
On the flip side, the 1.0800 confluence now seems to act as an immediate strong barrier, above which a bout of a short-covering has the potential to lift the EUR/USD pair towards the 38.2% Fibo. level, around the 1.0865-1.0870 region. Some follow-through buying, leading to a subsequent strength beyond the 1.0900 mark, suggests that the recent pullback from over a one-year high has run its course and shift the bias in favour of bullish traders.
The shared currency fails to gain any respite from bets for more rate hikes by the European Central Bank (ECB). It is worth recalling that ECB President Christine Lagarde has already made it clear that efforts to curb stubbornly high inflation aren’t over and said that there are factors that can induce significant upside risk to the inflation outlook. This, however, fails to impress bulls or lend any support to the EUR/USD pair. Investors now look to the ECB Bulletin for some impetus, though the focus will remain glued to Fed Chair Jerome Powell’s appearance later this Friday.
Market players will closely scrutinize Powell’s remarks for fresh clues about the US central bank’s next policy move. This, along with the US bond yields, the US debt-limit negotiations and the broader risk sentiment, will influence the USD price dynamics and provide some impetus to the EUR/USD pair on the last day of the week. Nevertheless, spot prices remain on track to register heavy losses for the second straight week and the aforementioned fundamental backdrop supports prospects for additional losses. Hence, any attempted recovery might still be seen as a selling opportunity.
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