EUR/USD Forecast: Uncertainty prevents EUR/USD directional movements

EUR/USD Current Price: 1.0738

• According to preliminary estimates, German inflation rose by 9.2% YoY in January.
• Last week central banks' decisions left market players with a sour taste.
• EUR/USD faded its early rally and trades at its comfort zone in the 1.0740/50 area.

The EUR/USD pair peaked at 1.0790 on Thursday, retreating in the American session to end the day in the 1.0750 price zone. The US Dollar started the day with a soft tone but changed course in the last trading session of the day. Market participants kept an eye on yields and stocks for direction in the absence of new central banks' news.

Following the United States Federal Reserve (Fed) and the European Central Bank (ECB) monetary policy decisions last week, investors were left with a sour mouth as policymakers repeated their well-known hawkish messages, somehow cooling investors' belief of changes in the tightening paths. Ever since, major pairs struggle for direction, although the USD remains near its recent multi-month lows.

Data-wise, the German Harmonized Index of Consumer Prices (HICP) unexpectedly rose by 9.2% YoY in January, below the 10% expected and easing from the previous 9.6%. On the one hand, easing inflationary pressures are welcomed news, yet on the other, it means the European Central Bank (ECB) can decelerate the pace of tightening. Also, ECB member and Bank of France head Francois Villeroy de Galhau hit the wires and said that, as of today, he thinks he can exclude a recession in the French economy.

The United States published Initial Jobless Claims for the week ended February 3, which rose by more than anticipated, hitting 196K. On Friday, Germany will release the December Current Account, while the United States will release the preliminary estimate of the February Michigan Consumer Sentiment Index alongside the University of Michigan's 5-year Consumer Inflation Expectation.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair shows that investors are still uncertain about the direction. EUR/USD keeps seesawing around the 61.8% retracement of the 2022 decline at 1.0745. Technical indicators remain flat within negative levels, while the pair continues to develop below a 20 Simple Moving Average (SMA), which slowly turns south. On a positive note, the 100 and 200 SMAs remain far below the current level, with the shorter aiming to advance below the longer one.

 The 4-hour chart shows that the pair barely holds above a directionless 20 SMA, while the 100 and 200 SMAs, lack directional strength above the current level. At the same time, the Momentum indicator turned lower but remains within neutral levels, while the RSI indicator gains downward traction at around 45.

 Support levels: 1.0700 1.0660  1.0620

Resistance levels: 1.0795 1.0840 1.0845

View Live Chart for the EUR/USD