EUR/USD Forecast: Buyers maintain the pressure in thin market conditions

EUR/USD Current price: 1.0849

• The German IFO Survey showed no progress in business sentiment in May.
• Holidays in the United Kingdom and the United States likely to maintain EUR/USD in range.
• EUR/USD maintains the bullish strength, although the momentum is limited amid bank holidays.

Financial markets struggle for direction on Monday, as holidays in the United Kingdom (UK) and the United States (US) limit trading volumes. The US Dollar (USD) maintains the mildly weak tone seen on Friday after a consumer survey showed inflation expectations tempered in the US, boosting the mood. Mid-European session, the EUR/USD pair eases from an intraday high of 1.0866 but holds within familiar levels.

 News coming from the Eurozone were mostly discouraging. Germany published a dismal IFO survey, as the Business Climate printed at 89.3 in May, matching a downwardly revised April figure. The assessment of the current situation deteriorated to 88.3, while expectations improved by less than anticipated in the month, up to 90.4 from 89.7.

Meanwhile, European Central Bank (ECB) officials delivered some comments on monetary policy. Chief economist Philip Lane said that the ECB is ready to cut interest rates in June but clarified that the monetary policy “must” continue to be restrictive as wage growth will not normalise until 2026. Also, Dr Olli Rehn, Governor of the Bank of Finland and member of the ECB Governing Council noted the central bank is not pre-committing to any rate path. He added that inflation is converging to the 2% goal in a sustained way, paving the way towards a June interest rate cut. However, he said it depends on a continued disinflationary trend and no geopolitical setbacks.

ECB officials had long anticipated a June rate cut, which, at this point, seems to be fully priced in. However, they have also been dialling back expectations for a July movement, warning they will take time before further monetary loosening.

US markets are closed due to Memorial Day, which means the country will not release relevant macroeconomic data.

EUR/USD short-term technical outlook

The EUR/USD pair is up for a second consecutive day, retaining a bullish stance despite the lack of momentum. In the daily chart, technical indicators maintain their upward slopes within positive levels, although the strength seems to be moderating. At the same time, EUR/USD advances beyond its moving averages, with buyers aligned around a flat 100 Simple Moving Average (SMA) at around 1.0815. Furthermore, a bullish 20 SMA keeps advancing below the latter, and above an also directionless 200 SMA.

The near-term picture is mildly bullish. In the 4-hour chart, technical indicators are gaining upward traction above their midlines after a consolidative period, suggesting increased buying interest around EUR/USD. Meanwhile, the pair remains above all its moving averages, with only the 100 SMA pushing north. Overall, chances of a bullish breakout are limited as American investors take the day off.

Support levels: 1.0815 1.0780 1.0720

Resistance levels: 1.0880 1.0920 1.0960