EUR/USD Forecast: USD profit-taking helps ease bearish pressure, for the time being
|The US Dollar extended its profit-taking slide for the second consecutive session on Thursday and helped the EUR/USD pair to snap four consecutive days of losing streak. The pair built on its recovery move from multi-month lows and surged through the 1.1900 handle, back closer to weekly tops, after the latest US consumer inflation figures came in weaker-than-expected.
The headline CPI grew 0.2% m-o-m in April and core inflation, which excludes volatile food and energy prices, came in to show a rise of 0.1%. Softer data dampened prospects for a steeper Fed monetary policy tightening cycle, evident from a sharp retracement in the US Treasury bond yields, and gave traders a much-needed reason to lighten their USD long positions.
Moving ahead, investors on Friday will closely scrutinize comments by the ECB President Mario Draghi, due to speak at the 8th edition of The State of the Union, in Florence. Draghi's comment on the central bank's economic outlook could influence the shared currency and eventually provide some meaningful impetus on the last trading day of the week.
From a technical perspective, yesterday's up-move might still be categorized a corrective in nature from near-term oversold conditions and especially after the recent slump of around 600-pips over the past four weeks. Hence, it would be prudent to wait for a strong follow-through buying before confirming that the pair might have bottomed out in the near-term.
From current levels, mid-1.1900s now seems to have emerged as an immediate resistance, above which the pair is likely to aim towards surpassing the key 1.20 psychological mark and test the very important 200-day SMA, currently near the 1.2020 region.
On the flip side, weakness back below the 1.1900 handle now seems to find some support near the 1.1850-45 region, which if broken would indicate that the pair's near-term bearish trajectory has still got some legs to go. Below the mentioned support, the pair is likely to accelerate the fall towards the 1.1800 handle before eventually dropping to its next support near the 1.1735 horizontal zone.
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