After reaching its lowest level in a month at 1.0900 on Thursday, the EURUSD staged a technical reversal early Friday. The little recovery in market sentiment in the European morning aids the pair in limiting its losses, and risk perception may continue to influence the activity ahead of the weekend.
On Thursday, investors avoided risky assets due to resurfacing worries of a worsening banking crisis in the United States. As a result, despite dismal weekly Initial Jobless Claims and lower-than-expected April Producer Price Index (PPI) data, the US Dollar (USD) outperformed its peers.
US market index futures are in positive territory early Friday, while the Euro Stocks 50 is up roughly 0.5%. A risk surge on Wall Street might add to the pressure on the USD ahead of the weekend, allowing the EURUSD to prolong its recovery.
Meanwhile, market investors will be watching statements from European Central Bank (ECB) officials closely. The Euro struggled to find demand as ECB policymaker Joachim Nagel pushed back against market speculation that the ECB will raise key rates twice more in July and September.
On Friday, the University of Michigan’s Consumer Sentiment Index for May will be featured on the US economic calendar. If the data reveals that financial troubles have had a major negative impact on consumer confidence, safe-haven flows may return to markets, forcing the EURUSD to remain under pressure heading into the weekend.
EURUSD Technical Analysis
EURUSD is perilously close to 1.0900 (static, psychological, and Thursday low). The four-hour chart’s Relative Strength Index (RSI) indicator, on the other hand, is near 30, indicating that the pair may stage a correction before the next move lower.
A four-hour closing below 1.0900 might attract more selling and pave the way for a further decline towards 1.0870 (Fibonacci 38.2% retracement of the recent rally) and 1.0800 (psychological level, Fibonacci 50% retracement).
On the upside, the Fibonacci 23.6% retracement level and the 200-period Simple Moving Average (SMA) appear to have generated solid resistance at 1.0950/1.0960. If the EUR/USD falls below that level and begins to use it as support, sellers may retreat. 1.1000 (100-period SMA, 50-period SMA, psychological level) in that case.
