EUR/USD Forecast: Bullish Despite Overbought, Profit-Taking Possible Ahead Of The Weekend

EUR/USD Current Price: 1.1336

• The ECB expanded its coronavirus-related stimulus program by €600 billion.
• US employment data suggest the Nonfarm Payroll report will post another outrageous month.
• EUR/USD bullish despite overbought, profit-taking possible ahead of the weekend.

The EUR/USD has extended its latest advance to a fresh multi-week high of 1.1362, ending the day with substantial gains above the 1.1300 threshold. The European Central Bank had a monetary policy meeting, living rates unchanged as widely expected, but also expanding its PEPP program by €600 billion and extended its stimulus scheme until June 2021, somehow anticipating that the recovery will take longer. The central bank also downgraded its growth and inflation forecast for this year and the next ones. The pair seesawed with the news but turned finally turned north, helped by disappointing US employment data.

In the US, job cuts announced by US-based employers totalled 397,016 in May, down 40.8% from April, but still far above pre-crisis levels. Initial Jobless Claims for the week ended May 29 came in slightly worse than anticipated, printing at 1.87 million, although the Continuing Jobless Claims for the week ended May 22 were up to 21.487 million. Also, the Trade Balance deficit widened to $-49.4 B in April.

This Friday, the EU won’t publish relevant data, but the US will unveil its May employment figures. The country is expected to have lost 8 million jobs in the month, while the unemployment rate is seen soaring to 19.8%. Average Hourly Earning are foreseen up by 8.6% YoY in the same month, almost tripling pre-pandemic levels, yet that’s the result of the sharp lost of low-income jobs amid the coronavirus crisis.

EUR/USD short-term technical outlook

 The EUR/USD pair has advanced for eight days in-a-row, and the risk of a bearish correction this Friday has increased exponentially.  Nevertheless, the bullish trend remains firmly in place, and the potential of a U-turn remains limited. The 4-hour chart shows that the pair has once again found buyers on an approach to a bullish 20 SMA, while technical indicators head sharply higher, despite being in overbought territory. Should the pair continue advancing, the next probable bullish target is the 1.1460 price zone, a long-term static resistance level.

Support levels: 1.1305 1.1260 1.1220

Resistance levels: 1.1365 1.1410 1.1460

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