EUR/USD Forecast: Lacking directional strength ahead of fresh clues

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0851

German annual inflation rose by more than anticipated in May, according to preliminary estimates.
Federal Reserve officials keep pouring cold water on potential interest rate cuts.
EUR/USD holds within familiar levels as investors await fresh clues.

The EUR/USD pair fell early on Wednesday, finding intraday buyers at 1.0836. Comments from Federal Reserve (Fed) officials further diluted the odds of a September interest rate cut, spurring risk aversion across financial markets. As a result, stock markets turned south, with most Asian indexes dipping in the red. European ones also edged lower, limiting the bounce ahead of the release of German inflation data.

According to preliminary estimates, the Harmonized Index of Consumer Prices (HICP) rose by 0.1% MoM in May, while the annual increase hit 2.8%, the latter surpassing expectations of 2.7% and the previous 2.4%, Germany's Destatis reported. The EUR/USD pair recovered further with the news but remains within familiar levels at around 1.0850.

The American session will bring just minor figures from the United States (US). The country will release the Richmond Fed Manufacturing Index for May and the Fed's Beige Book. Additionally, Fed New York President John Williams is set to make a public appearance.

EUR/USD short-term technical outlook

The daily chart shows the EUR/USD pair unchanged for a second consecutive day. Still, it is losing bullish strength rather than suggesting an upcoming slump, as it is still trading above all its moving averages. Furthermore, the 20 Simple Moving Average (SMA) maintains its bullish momentum and currently aims to cross above a flat 100 SMA, both converging around 1.0815. Finally, technical indicators are neutral-to-lower, although holding well above their midlines.

In the near term, EUR/USD maintains a neutral stance. Technical indicators turned higher but stand within neutral levels, far from suggesting strong buying interest. Meanwhile, the 20 SMA caps advances in the 1.0860 region, while the 100 SMA provides intraday support. The most likely scenario is that EUR/USD will remain within familiar levels before the release of the US Personal Consumption Expenditures (PCE) Price Index, the Fed's favorite inflation measure, next Friday.

Support levels: 1.0815 1.0780 1.0740

Resistance levels: 1.0910 1.0960 1.1000

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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