EUR/USD Forecast: Bears take control, break through 1.0635 on the table

EUR/USD Current Price: 1.0681
S&P Global downwardly revised the May EU Services PMIs.
Stock markets struggle to retain the green as government bond yields jump.
EUR/USD bearish case firmer as the pair approaches a two-month low.
The EUR/USD pair remains under selling pressure as the US Dollar retains its strength, currently trading at around 1.0680. Following the upbeat United States (US), Nonfarm Payrolls report (NFP) published on Friday and comments from different Federal Reserve (Fed) officials, market participants now believe the Fed would pause in June but leave the door open for additional hikes in the future.

The week started with mild optimism, which seems to fade as the day passes. Major Asian stock markets posted substantial gains, but European indexes struggle to remain afloat. At the same time, Wall Street futures show little change from Friday’s closing levels and are set to open flat.
Meanwhile, government bond yields extend their latest advance. The 2-year Treasury note added 5 basis points (bps) ahead of the US opening and currently offers 4.55%, while the 10-year note yields 3.75%.

Data-wise, S&P Global published the final estimates of its May PMIs for the Union. Services output was downwardly revised in all major economies, leading to the EU Services PMI being confirmed at 55.1, below the previous estimate of 55.9. Despite the revisions, all indexes remained in expansionary territory, having a limited impact on the Euro. On a negative note, EU Sentix Investor Confidence declined in June to -17 from -13.1 in May, while the April Producer Price Index (PPI) rose by 1% YoY, well below the previous 5.9%.

S&P Global will release the final estimates of the May US Services and Composite PMIs, while the country will publish the official ISM Services PMI for the same month. The macroeconomic calendar also includes April Factory Orders.

EUR/USD short-term technical outlook
The EUR/USD pair trades with modest losses, not far above the two-month low posted last week at 1.0634. Technical readings in the daily chart favor a downward extension as a bearish 20 Simple Moving Average (SMA) heads south below a flat 100 SMA, both above the current level. Also, the pair remains below a critical static support level, the 61.8% Fibonacci retracement of the 2022 yearly slump at 1.0745. Finally, technical indicators remain within negative levels, with neutral-to-bearish slopes.

The near-term picture is bearish. In the 4-hour chart, a mildly bearish 20 SMA provides intraday resistance at around 1.0710, while the longer moving averages accelerate their slides far above the shorter one. At the same time, the Momentum indicator grinds lower within neutral levels, while the Relative Strength Index (RSI) indicator heads firmly south at around 41, reflecting prevalent selling interest.

Support levels: 1.0635 1.0590 1.0550

Resistance levels: 1.0710 1.0745 1.0790