The EUR/USD pair moved slightly higher on Friday, helped by a softer greenback across the board. The pair remained on track to post its first weekly gain after three consecutive losses.
Still, the shared currency was having a hard time finding buyers after disappointing PMI data from the European Union and Germany revived concerns over a recession in Europe.
Furthermore, German IFO Business Climate index dipped to 92.3 in June, down from 93.0 in May (92.8 expected).
Meanwhile, investors were scaling back European Central Bank’s hike expectations. Markets were pricing in less than 150 bps increases by the end of the year, pointing to a modest 25 bps hike in July, in opposition to some expectations of 50 bps for the first ECB move.
On the other hand, this week Fed Chair Jerome Powell left clear the FOMC was “strongly committed” to slowing down inflation, not taking any size of increases off the table.
Powell acknowledged policy tightening could cause a recession, but argued the US was sufficiently resilient to withstand tougher monetary policy.
Next week, ECB President Christine Lagarde, BoE Governor Andrew Bailey and Fed Chairman Jerome Powell will speak at a panel at the ECB’s annual Forum on Central Banking on Wednesday.
While fundamentals continue to favor the dollar, from a technical standpoint, the EUR/USD holds a negative bias according to the weekly chart, as it remains near cycle lows with indicators in negative territory and having corrected from oversold conditions.
In the daily chart, the bearish pressure has eased somewhat as the RSI and the MACD are entering positive ground. Still, the EUR/USD pair holds below the 20-day SMA and a descending trendline coming from February’s highs, currently around 1.0650.
As long as the EUR/USD pair holds below this level more falls are likely.
Immediate support is seen at the 1.0470 area, followed by the 1.0400 psychological level, and then the YTD low struck last month at 1.0348.
On the upside, the 20-day SMA offers immediate resistance at around 1.0590, while the mentioned trendline at 1.0650 is the key level to overcome.
A break above the latter could pave the way to a steeper bound towards June highs at the 1.0770 area.
