EUR/USD Forecast: Poised to challenge the 1.0700 threshold

The EUR/USD pair is confined to a 30 pips range this Monday amid the Whit Monday holiday in Europe. United States (US) banks will also be closed today as the country celebrates Memorial Day, keeping volatility constrained at the beginning of the week. The US Dollar retains most of its recent strength despite good news spurring optimism.

President Joe Biden and Republican House Speaker Kevin McCarty announced on Sunday that they reached an agreement on the debt ceiling extension. It still has to pass Congress, but American authorities are confident they could pass the deal. The deal would allow the government to continue borrowing money as they have not raised the limit but suspended it entirely until 2025. The agreement keeps non-defence spending flat next year, with a 1% rise in 2025, while defence spending would increase by 3% this year. Finally, the White House reported government spending would be reduced by at least $1 trillion.
Stock markets welcomed the news, with Wall Street futures gapping higher, although with limited action amid the aforementioned holidays. Meanwhile, the macroeconomic calendar will remain empty on Monday but offers some interesting figures throughout the week. On the one hand, Europe and Germany will release the preliminary estimates of the Harmonized Index of Consumer Prices (HICP) for May, while the US will publish the Nonfarm Payrolls report next Friday.

EUR/USD short-term technical outlook
The daily chart for the EUR/USD pair shows that sellers are aligned around a critical Fibonacci resistance level, the 61.8% retracement of the 2022 yearly decline at 1.0745, while it barely holds above the two-month low posted last Friday at 1.0701. Technical readings maintain the risk skewed to the downside as the pair develops below the 20 and 100 Simple Moving Averages (SMAs), with the shorter gaining bearish traction above the longer one. Finally, the Relative Strength Index (RSI) indicator heads firmly lower at around 32, while the Momentum indicator consolidates well below its 100 level without signs of bearish exhaustion.

In the near term and according to the 4-hour chart, bears are also in control. A bearish 20 SMA is capping advances while crossing below the aforementioned Fibonacci level. The longer moving averages stand far above it, accelerating their declines and reflecting persistent selling interest. Technical indicators, in the meantime, remain within negative levels, lacking clear directional strength but still suggesting the absence of buying interest.

Support levels: 1.0700 1.0660 1.0620

Resistance levels: 1.0745 1.0790 1.0840