EUR/USD Forecast: Dollar bulls in control of the FX board

EUR/USD Current Price: 1.0727

• Growing coronavirus cases in China exacerbate global growth concerns.
• Global stocks are on the back foot as investors rush into safety.
• EUR/USD is technically bearish and poised to test the 2020 low at 1.0635

Risk aversion took over financial markets at the weekly open amid Chinese growth-related headlines. The government put under lockdown some Beijing districts due to a coronavirus outbreak, while Apple’s prime supplier Foxconn Technology Group halted operations at two of its plants in eastern China, exacerbating supply-chain issues, which jeopardize economic progress. The EUR/USD pair plunged to 1.0706, its lowest since March 2020, when the pandemic sent it to a multi-year low of 1.0635

Meanwhile, in France, Emmanuel Macron won the presidential reelection, which brought relief to European democracy. Nevertheless, the far-right got record support in the divided country, as Marine Le Pen got 41.4% or 13.3 million votes. Additionally, the EU is studying more sanctions on Russia, cutting oil imports from the country.

Those combined factors weighed on high-yielding equities, resulting in substantial losses in Asian and European indexes. Wall Street is set to open sharply down after plummeting on Friday, somehow hinting at continued demand for the safe-haven dollar.

Data wise, Germany published the April IFO survey on Business Climate, which came in better than anticipated, improving to 91.8 from 90.8. The EU released February Construction Output, up 1.9% in the month, while the US published the March Chicago Fed National Activity Index, which printed at 0.44. The rest of the day will be quiet in terms of data, as the only report pending is the US Dallas Fed Manufacturing Business Index.

EUR/USD short-term technical outlook

The EUR/USD pair bounced from the mentioned low but remains on the losing side, trading at around 1.0723 at the beginning of the American session. The daily chart shows that there’s room for additional declines, as the pair keeps developing far below bearish moving averages and reaching lower lows. The Momentum indicator lacks directional strength but remains within negative levels, while the RSI indicator heads firmly south at around 34.

The 4-hour chart shows that the risk remains skewed to the downside, as the pair hovers near the mentioned daily low with a strong bearish momentum. The longer moving averages head firmly south far above the current level while the 20 SMA is gaining bearish traction. The Momentum indicator heads south almost vertically, while the RSI indicator approaches oversold readings without signs of bearish exhaustion. The pair has room now to test the 2020 low at 1.0635.

Support levels: 1.0700 1.0665 1.0630

Resistance levels: 1.0770 1.0810 1.0845

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