EUR/USD Forecast: Quiet correction continue but beware the Brexit storms

• EUR/USD extends its quiet recovery between two critical US data points.
• Brexit developments may steal the show.
• The technical picture is slightly bearish for the pair.

EUR/USD is trading in the mid-1.1200s, slightly up on the day. The world's most-popular currency pair extends its recovery after the European Central Bank turned dovish on Thursday. The ECB pledged low rates until the end of the year, announced a new funding scheme, and slashed 2019 growth forecasts.

German data seems to support the notion of the slowdown extending into 2019. Industrial output dropped by 0.8% in January, against an increase that was expected. The downfall was countered by an upward revision for December, but the continent's powerhouse is still struggling. 

Crossing the Atlantic, Federal Reserve Chair Jerome Powell gave an extensive interview to CBS's "60 Minutes" and reiterated the message of patience on interest rates. He stressed that the US economy is doing well, but headwinds are coming from outside. 

The world's most powerful central banker did not seem concerned about the disappointing headline Non-Farm Payrolls number which showed a meager increase of only 20K, far below 180K expected. The upbeat data that was seen beforehand, the acceleration in wage growth and the drop in the unemployment and underemployment rates all countered the headline, for markets and for the Fed.

The focus now shifts to the US retail sales report. After a disastrous December, January projected to show a bounce and the revisions will be of higher importance than in other editions. 

See:  US Retail Sales Preview: The question of December

China's Central Bank Governor Yi Gang praised the collaboration with the US Fed and expressed hope on ongoing trade talks. Some expect the People's Bank of China (PBOC) to announce a cut in its interest rate to further stimulate the economy. His words helped improve the market mood.

Brexit and EUR/USD

The Brexit drama reaches new highs. Negotiations between the UK and the EU last week did not result in a breakthrough. Chief EU Negotiator Michel Barnier released a series of tweets that showed concessions to the UK. PM May asked the EU to do more. 

At the time of writing, the UK Parliament is set to vote on May's deal on Tuesday, with a failure planned to result in a delay of Brexit. However, the acrimonious atmosphere may lead to a delay in the vote. If the UK does not formally ask for an extension and no deal is approved by Parliament, the UK will leave the EU without an agreement on March 29th. The no-deal scenario is detrimental for the UK but would hurt the euro-zone as well.

Brexit developments may set the tone for EUR/USD today. 

EUR/USD Technical Analysis

Momentum is waning but remains to the downside on the four-hour chart. The Relative Strength Index is leaning lower, but has exited oversold conditions and is above 30. EUR/USD remains below the 50 and 200 Simple Moving Averages. All in all, the picture is bearish.

Some support awaits at 1.1235 which was the February low. 1.1215 was the trough in 2018 and may provide further support. The fresh 2019 bottom at 1.1176 is next. 1.1115 already dates back to 2017.

1.1250 is the recent high, and it is followed by 1.1275 that provided support in mid-February. 1.1290 is the next level to watch after it cushioned euro/dollar in early March. 1.1310 and 1.1325 are next.