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EUR/USD Forecast: At Risk Of Extending Its Decline Once Below 1.0790c

Valeria Bednarik - Chief Analyst at FXStreet

EUR/USD Current Price: 1.0848

  • US ISM Non-Manufacturing PMI contracted to 41.8 in April, better than anticipated.
  • The market’s mood was upbeat amid economic re-openings.
  • EUR/USD at risk of extending its decline once below 1.0790.

A better market mood lifted the greenback, particularly against its European rivals this Tuesday. The EUR/USD pair fell to 1.0825 as shared currency was the worst performer, affected by news coming from Germany. The German Constitutional Court ruled on the ECB stimulus program introduced back in 2015. The court said that the program had not violated any law, yet gave a three-month ultimatum to the ECB in order to demonstrate the proportionality between the plan and its effects. The news triggered a sell-off in local bonds, weighing also on local indexes, which anyway closed in the green. The upbeat sentiment was underpinned by economic re-openings, as some European countries and US states are slowly returning to normal.

The EU released its March PPI, which contracted by 1.5% when compared to a month earlier and fell by -2.8% YoY. The US released its April ISM Non-Manufacturing PMI, which came in better than anticipated at 41.8. Still, the employment sub-component plunged to a record low.

Wednesday will bring the final versions of the EU Markit Services PMIs for April, and the Union’s Retail Sales, these last, seen down by 10.5% in March. The US will publish the ADP survey on private job’s creation seen down by 20 million. The report will be critical ahead of the Nonfarm Payroll report later this week, as the unemployment rate is seen north of 16%.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair is trading at the lower end of its daily range ahead of the US close, retaining its bearish stance. In the 4-hour chart, the pair has established below all of its moving averages, with an attempt to regain the upside meeting sellers in the 1.0880 price zone, where it has the 100 and 200 SMA. Technical indicators remain at daily lows, lacking directional strength yet with no signs of downward exhaustion. A steeper decline is to be expected on a break below 1.0790, a strong static support level.

Support levels: 1.0825 1.0790 1.0755

Resistance levels: 1.0880 1.0920 1.0950

Image sourced from Pixabay

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