(FXStreet)
– EUR/USD has recovered modestly after Wednesday’s indecisive action.
– Investors are likely to refrain from betting on a steady rebound in the pair.
– An improving market mood could limit the US Dollar’s upside.
EUR/USD has gone into a consolidation phase at around 1.0550 but it’s too early to say whether the pair can extend its technical correction following Tuesday’s sharp decline. The near-term technical outlook suggests that the bearish bias stays intact. Nevertheless, investors are likely to stay on the sidelines ahead of Friday’s February jobs report from the US.
On the second day of his semi-annual testimony, FOMC Chairman Jerome Powell said that they have not yet made any decisions about the next policy step and added that have important data coming up before the March meeting. Although this comment limited the US Dollar’s upside for the time being, it had little to no impact on Fed bets. According to the CME Group FedWatch Tool, markets are currently pricing in a 78% probability of a 50 basis points (bps) rate hike at the next meeting.
Later in the session, the US Department of Labor will release the weekly Initial Jobless Claims data, which is expected to stay below 200K.
There won’t be any other high-impact data releases from the US and market participants are likely to keep a close eye on risk sentiment.
US stock index futures are down between 0.2% and 0.5% in the European morning. US President Joe Biden proposed hikes in corporate and billionaire taxes but markets don’t expect this plan to be approved in the Republican-controlled House of Representatives.
In case there is a rebound in Wall Street’s main indexes after the opening bell, EUR/USD could stretch higher and vice versa. It would, however, be surprising to see a decisive move in either direction.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart stays well below 50 early Wednesday and the 20-period Simple Moving Average (SMA) on the same chart crossed below the 50-period SMA, reflecting the bearish bias.
On the upside, 1.0580 (static level) aligns as the initial resistance before the 1.0600/1.0610 area, where the 20 and 50-period SMAs align. In case the pair rises above that hurdle, it is likely to face another resistance at 1.0630 (100-period SMA).
The first static support is located at 1.0530. With a four-hour close below that level, EUR/USD could extend its slide toward 1.0500 (psychological level), 1.0480 (2023-low), and 1.0450 (static level from December).
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