EUR/USD Forecast: Failure at 1.0900 triggers correction
- US Dollar resurfaces as optimism fades in Wall Street.
- Eurozone PMIs on Friday could be critical for ECB hawkish expectations.
- EUR/USD ends five-day positive streak, retreating a hundred pips from the recent top.
The EUR/USD ended a five-day positive streak on Thursday on the back of a US Dollar recovery. A deterioration in market sentiment late in Wall Street amid banking jitters boosted Treasury bonds and the US Dollar. The pair, which hit its highest since February at 1.0933 early in Europe, dropped below 1.0830 in New York, giving up most gains that followed the FOMC meeting.
Hawkish comments from European Central Bank (ECB) officials kept making headlines on Thursday, offering support to the Euro during most of the day. But on American hours, the common currency lost momentum on banking jitters.
Data from the US on Thursday showed the Chicago Fed National Activity Index dropped to -0.19 from 0.23 while Initial Jobless Claims fell to 191,000, the lowest in three weeks, showing a tight labor market.
The releases of the preliminary PMIs in the Eurozone (EZ) and the US are due on Friday. Those numbers could be important for markets, considering it would be the first glance at how the global economy is performing in March. Positive figures from the EZ should keep the ECB on its way to more rate hikes. But, all the numbers could be offset by market turmoil if confidence continues to deteriorate.
EUR/USD short-term technical outlook
The EUR/USD ended not only a positive streak on Thursday, but also offered signs that it has peaked above 1.0900, at least in the short term. The ongoing correction could find an initial support level around 1.0800, followed by 1.0760, which should limit the downside. Below, the 20-day Simple Moving Average (SMA) awaits at 1.0650.
The 4-hour chart shows technical indicators favoring the downside or a consolidation far from the recent top, with the RSI moving down just under 70. A consolidative phase could take place between 1.0865 (intraday resistance) and the 20 SMA at 1.0800.
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