EUR/USD Forecast: Battle around 1.0600 underway

EUR/USD Current Price: 1.0610

• European core inflation was higher than initially anticipated in January.
• FOMC Minutes underpin US Dollar demand amid hints of more monetary tightening.
• EUR/USD bounced modestly from a fresh February low, risk skewed to the downside.

The EUR/USD pair fell through the 1.0600 threshold and posted a fresh February low of 1.0585, as the Greenback continues strengthening on the back of hawkish US Federal Reserve (Fed) prospects. The United States central bank released the Federal Open Market Committee (FOMC) Meeting Minutes on Wednesday, which were more hawkish than anticipated.

The central bank hiked its benchmark rate by 25 basis points (bps) on February 1 before the release of higher-than-anticipated inflation figures. The Minutes, however, showed that a few members would have preferred a 50 bps hike and that participants believe the continued tight job market would contribute upward pressure to inflation. Finally, policymakers noted that, while inflation is easing, they would need further signs to step back. The news boosted demand for the US Dollar as stock markets turned south.

Early on Thursday, the Euro Zone published the final estimate of the January Harmonized Index of Consumer Prices (HICP), confirmed at 8.6% YoY. However, the core reading was upwardly revised to 5.3% from a preliminary estimate of 5.2%. The American session will bring the second estimate of the US Q4 Gross Domestic Product (GDP) and Initial Jobless Claims for the week ended February 17.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows it has room to extend its slump. The 20 Simple Moving Average (SMA) gains downward traction above the current level, now converging with a Fibonacci resistance at 1.0745, the 61.8% retracement of the 2022 slump. The 50% retracement of such a decline stands at 1.0515, a potential bearish target should the slide continues. At the same time, technical indicators remain within negative levels, although losing their bearish strength.

In the near term, and according to the 4-hour chart, the ongoing recovery falls short of supporting a continued advance. The pair continues developing below all its moving averages, with the 20 SMA accelerating south below the longer ones. Technical indicators, in the meantime, have recovered from their intraday lows but lack momentum and hold within negative levels.

Support levels: 1.0560 1.0515 1.0470

Resistance levels: 1.0630 1.0695 1.0745

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