EUR/USD Price Forecast: Parity on the Cards as Risk Aversion Bites

For the EUR, it is a quieter day on the Eurozone economic calendar.

French trade data and Italian industrial production figures were in focus this morning. The numbers were EUR negative.

In May, the French trade deficit widened from €12.72 billion to €12.99 billion versus a forecasted €12.8 billion deficit.

In Italy, industrial production fell by 1.1% in May, reversing most of a 1.4% increase from April.

While the stats were EUR negative, market angst over COVID-19 news updates from China and apprehension ahead of US nonfarm payrolls weighed.

However, the ECB will be back in the spotlight later today.

ECB President Lagarde is due to speak early in the European session. Following the ECB meeting minutes on Thursday, the markets will be looking for any views on the economic outlook and monetary policy.

Concerns over the Eurozone’s economic outlook continue to question how far the ECB can go to bring inflation under control.

EUR/USD Price Action

At the time of writing, the EUR was down 0.44% to $1.01116.

A choppy morning saw the EUR rise to an early high of $1.01912 before falling to a low of $1.00716.

The EUR/USD fell through the First Major Support Level (S1) at $1.0127 and the Second Major Support Level (S2) at $1.0097 before steadying.

Technical Indicators

The EUR/USD will need to move through S1 and the $1.0174 pivot to target the First Major Resistance Level (R1) at $1.0204 and the Thursday high of $1.0221.

ECB President Lagarde will need to deliver hawkish monetary policy chatter to support a morning rebound.

An extended rally would bring the Second Major Resistance Level (R2) at $1.0251 into play. The Third Major Resistance Level (R3) sits at $1.0328.

Failure to move through S1 and the pivot would bring the Second Major Support Level (S2) at $1.0097 back into play.

Barring an extended sell-off throughout the day, the EUR should avoid sub-$1.00. The Third Major Support Level (S3) at $1.0020 would likely limit the downside.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

At the time of writing, the EUR sat below the 50-day EMA, currently at $1.03206.

The 50-day EMA slid back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, EUR/USD price negative.

While a move through R1 would support a return to $1.025, the EUR/USD pair would likely fall short of the 50-day EMA.

The US Session

US nonfarm payrolls are due out and will be the key driver of the day. A sharp rise in payrolls should weigh on the EUR/USD pair. While the ECB meeting minutes revealed a willingness to take more aggressive steps to curb inflation, economic woes leave policy divergence in favor of the greenback.