EUR/USD Forecast: Bulls at the mercy of receding demand for the safe-haven USD

The EUR/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses amid relatively thin liquidity conditions on Friday. The shared currency had a rather muted reaction to the release of the final version of the Eurozone Services PMI prints, which were revised higher but remained in the contraction territory. The pair finally ended nearly unchanged for the day and modest weekly gains for the second straight week.

Meanwhile, the incoming positive economic data remained supportive of expectations for a sharp V-shaped global economic recovery, which overshadowed concerns about surging coronavirus cases. This, in turn, continued undermining the US dollar's relative safe-haven status and assisted the pair to regain positive traction on the first day of a new trading week. Bulls seemed rather unaffected by the European Central Bank Presiden Christine Lagarde's dovish comments over the weekend.

Speaking about alternative growth models at a webinar on Saturday, Lagarde said that a falling trend in price pressures will persist over the next two years due to the coronavirus pandemic-driven economic transformation. Lagarde further added that the transition to a new economic model will be “disruptive”, hitting employment and production, albeit Europe is in an “excellent position.”

The pair moved back closer to the 1.1300 round-figure mark as traders now look forward to the release of the EU July Sentix Investor Confidence Index for a fresh impetus. The US economic docket highlights the release of ISM Non-Manufacturing PMI, which might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session. The gauge for the US Services sector is expected to have recovered to 49.5 for June as compared to 45.4 previous.

Short-term technical outlook

From a technical perspective, the pair is now looking to build on the momentum beyond a three-week-old descending trend-line. The mentioned trend-line constituted to the formation of a symmetrical triangle on short-term charts. However, any meaningful positive move is likely to confront some fresh supply near the 1.1350 double-top resistance. That said, a sustained strength beyond might be seen as a fresh trigger for bullish traders and assist the pair to reclaim the 1.1400 round-figure mark. Some follow-through buying has the potential to lift the pair further towards YTD tops, just ahead of the key 1.1500 psychological mark.

On the flip side, any meaningful pullback might now find some support near the 1.1230-25 region, which is closely followed by the 1.1200 round-figure mark. The mentioned level coincides with the lower end of the symmetrical triangle, which if broken will set the stage for a further near-term depreciating move. A subsequent slide below the 1.1180-70 will confirm a near-term bearish breakdown and accelerate the slide towards the 1.1100 round-figure mark. The downward trajectory could further get extended towards retesting the very important 200-day SMA, currently near the 1.1040-35 region.