EUR/USD Forecast: Bears hold the grip despite the latest bounce

EUR/USD Current price: 1.0731

• The German ZEW Survey showed a modest improvement in Economic Sentiment.
• United States Retail Sales disappointed rising by just 0.1% in May.
• EUR/USD at risk of falling further, the year low at 1.0600 in sight.

The EUR/USD pair peaked at 1.0742 on Tuesday, as the US Dollar came under mild selling pressure due to a better market mood at the end of Monday. Wall Street posted nice gains on the first trading day of the week, helping its Asian and European counterparts remain afloat throughout the first half of Tuesday. Nevertheless, the USD managed to post modest gains across the FX board.

In the case of the Euro, the shared currency was partially affected by comments from European Central Bank (ECB) Vice President Luis de Guindos, who said the best time to make a rate decision is alongside updated projections, cooling hopes for a July trim.

Data-wise, the Eurozone confirmed that the Harmonized Index of Consumer Prices (HICP) rose 2.9% YoY in May, as previously estimated, while the monthly reading also matched the flash estimate. Also, the German ZEW survey showed that Economic Sentiment posted a modest improvement in June, up to 47.5 from 47.1, missing expectations. The assessment of the current situation was much worse than anticipated, down to -73.8 from -72.3 in May. Finally, the Economic Sentiment in the EU improved to 51.3, beating the expected 47.8.

The US Dollar shed some ground after the release of United States (US) data, as Retail Sales in the country rose a modest 0.1% in May, below the 0.2% expected. The April figure was downwardly revised to -0.2%, further weighing on the Greenback. Up next, the country will release Capacity Utilization and Industrial Production readings for May. The American afternoon will be filled with speeches from Federal Reserve (Fed) officials.

EUR/USD short-term technical outlook

Technically, the daily chart for the EUR/USD pair shows the risk remains skewed to the downside. The pair keeps changing hands below all its moving averages, with the 20 Simple Moving Average (SMA) gaining downward traction, although still above the longer ones. Technical indicators, in the meantime, remain below their midlines, although with divergent slopes, falling short of suggesting an upcoming directional movement.

In the near term, and according to the 4-hour chart, EUR/USD has scope to extend its slide. A sharply bearish 20 SMA contained advances since the day started, with the pair now struggling around it. At the same time, a bearish 100 SMA is about to cross below a flat 200 SMA, both in the 1.0810 price zone, reflecting increased selling interest. Finally, technical indicators remain lifeless within negative levels, as the latest bounce partially offset the former bearish momentum.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0750 1.0800 1.0840