The EUR/USD pair has entered into a consolidation phase around the 1.0500 level after hitting a fresh five-year low of 1.0470 on Thursday. The pair seems to have found a new comfort zone as investors prepare for the Federal Reserve decision on Wednesday and the nonfarm payrolls report on Friday.
The Fed is expected to hike rates by 50 basis points when it concludes its meeting on Wednesday. Investors are also anticipating President Jerome Powell to hint at a move toward reducing its balance sheet. In addition, risk sentiment improved on Tuesday, giving some respite to the euro. Wall Street indexes traded in the green while U.S. Treasury yields pulled back from multi-year highs.
However, EUR/USD recovery has remained limited below 1.0580 while the dollar keeps the upper hand fundamentally speaking, supporting fresh cycle lows in the near term. Still, one cannot rule out profit-taking and erratic moves around big economic events.
From a technical perspective, the EUR/USD pair maintains the short-term bearish bias according to the daily chart. Indicators remain below their midlines, favoring further falls. However, the RSI continues to point to oversold conditions keeping the bearish potential limited at the time being.
A break below the 1.0470 level would pave the way for a test of the 1.0400 psychological level, followed by the 2017 yearly low at 1.0340. Below this latter, the EUR/USD would be trading at its lowest level since 2003. On the other hand, an initial resistance is seen at the 1.0590-1.0610 area, followed by 1.0650 and then the 20-day SMA at 1.0745.
