EUR/USD Forecast: Euro needs to reclaim 1.0950/60 to turn bullish

• EUR/USD has staged a rebound after having dropped to a multi-week low on Thursday.
• The US Dollar could have a hard time gathering strength in case risk flows return.
• The pair is likely to face stiff resistance in 1.0950/60 area.

EUR/USD has staged a technical correction early Friday after having touched its weakest level in a month at 1.0900 on Thursday. The modest improvement in market mood in the European morning helps the pair limit its losses and risk perception could continue to drive the action ahead of the weekend.

Resurfacing fears over a deepening banking crisis in the United States caused investors to stay away from risk-sensitive assets on Thursday. Consequently, the US Dollar (USD) outperformed its rivals despite the disappointing weekly Initial Jobless Claims and lower-than-expected April Producer Price Index (PPI) data. 

Early Friday, US stock index futures trade in positive territory and the Euro Stoxx 50 is up nearly 0.5%. A risk rally in Wall Street could put additional weight on the USD ahead of the weekend and allow EUR/USD to extend its rebound.

Meanwhile, market participants will keep a close eye on comments from European Central Bank (ECB) officials. After  ECB policymaker Joachim Nagel pushed back against market chatter that the ECB was likely to hike its key rates two more times in July and September, the Euro struggled to find demand. 

The US economic docket will feature the University of Michigan's Consumer Sentiment Index for May on Friday. In case the report shows that banking woes had a significant negative impact on consumer confidence, safe-haven flows could return to markets and force EUR/USD to stay on the back foot heading into the weekend.

EUR/USD Technical Analysis

EUR/USD stays dangerously close to 1.0900 (static level, psychological level, Thursday low). The Relative Strength Index (RSI) indicator on the four-hour chart, however, aligns near 30, suggesting that the pair could stage a correction before the next leg lower.

A four-hour close below 1.0900 should bring in additional sellers and open the door for an extended slide toward 1.0870 (Fibonacci 38.2% retracement of the latest uptrend) and 1.0800 (psychological level, Fibonacci 50% retracement).

On the upside, stiff resistance seems to have formed at 1.0950/1.0960, where the Fibonacci 23.6% retracement level and the 200-period Simple Moving Average (SMA) align. Sellers could move to sidelines if EUR/USD rises below that level and starts using it as support. In that scenario, 1.1000 (100-period SMA, 50-period SMA, psychological level) and 1.1050 (static level) could be seen as next bullish targets.