EUR/USD Forecast: Bulls might wait for a sustained move beyond 1.1900 mark

• Sustained USD selling assisted EUR/USD to attract some dip-buying on Friday.
• The impasse over the fiscal stimulus measures continued undermining the USD.
• The upbeat market mood further weighed on the greenback’s safe-haven status.

The EUR/USD pair witnessed a modest intraday pullback on Friday, albeit managed to attract some dip-buying near the 1.1780 region and finally settled near the top end of its daily trading range. The US dollar remained depressed amid the uncertainty over the next round of the US fiscal measures. In fact, the Congress suspended talks for the COVID-19 stimulus package and left for a month-long recess on Thursday. The Senate will not return this month unless negotiators strike an agreement, fueling concerns about the US economic recovery from the damage caused by the coronavirus outbreak.

On the economic data front, the second estimate of the Eurozone GDP came in to show that the economy contracted by 12.1% during the three months to June, albeit did little to influence the shared currency. From the US, the monthly Retail Sales increased by 1.2% in July as against the 1.9% growth anticipated. Conversely, sales excluding autos rose 1.9% MoM and the Retail Sales Control Group climbed 1.4%, both beating estimates. Separately, the preliminary Michigan Consumer Sentiment Index for August edged higher to 72.8 from 72.5 previous, though failed to impress the USD bulls.

Apart from this, a positive mood around the equity markets further undermined the greenback's relative safe-haven status and remained supportive of the pair's modest uptick. The global risk sentiment remained well supported by the optimism over a potential vaccine for the highly contagious coronavirus disease and got an additional boost from the postponement of the US-China trade deal review. The meeting was originally scheduled for Saturday and the delay leaves the phase one deal intact, at least for now, which, in turn, assisted the pair to edge higher for the fifth consecutive session.

There isn't any major market-moving economic data scheduled for release from the Eurozone and hence, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum on Monday. The US economic docket highlights the release of the Empire State Manufacturing Index. The data is likely to pass unnoticed as the focus remains on the FOMC meeting minutes, scheduled for release on Wednesday.

Short-term technical outlook

From a technical perspective, the recent bounce from the vicinity of the 1.1700 mark and the emergence of some dip-buying over the past few trading sessions supports prospects for additional gains. Looking at the broader picture, the pair has been oscillating in a broader range over the past three weeks or so, forming a rectangle on short-term charts. This makes it prudent to wait for a sustained break in either direction before positioning for the pair’s near-term trajectory.  Nevertheless, the pair still seems poised to move back to reclaim the 1.1900 mark and retest the recent swing highs, around the 1.1915 region. Some follow-through buying has the potential to lift the pair further towards the key 1.2000 psychological mark with some intermediate resistance near the 1.1975-80 region.

On the flip side, any pullback towards the 1.1800 mark might still be seen as a buying opportunity and remain limited near the 1.1780-75 horizontal support. That said, failure to defend the mentioned support now seems to accelerate the fall back towards the trading range support near the 1.1700 mark. A convincing breakthrough will be seen as a fresh trigger for bearish traders and set the stage for a slide towards the 1.1625-20 support area. Subsequent weakness below the 1.1600 mark might turn the pair vulnerable to extend the corrective slide towards testing the next major support near the 1.1550-40 region, marking the 50% Fibonacci level of the 1.1168-1.1916 rally.