EUR/USD Forecast: Holds steady near multi-month tops, bulls await Eurozone PMIs

• The euro remained well supported by the EU recovery fund agreement.
• Upbeat German Gfk Consumer Confidence further underpinned the euro.
• Sustained USD selling provided an additional boost to the EUR/USD pair.
• Flash Eurozone/US PMI prints eyed for some meaningful trading impetus.

The US dollar did attract some haven flows during the first half of the trading action on Thursday amid concerns over worsening US-China relations. However, growing worries that the second wave of the coronavirus infections in the US could delay the economic recovery kept a lid on any meaningful gains for the greenback, instead prompted some fresh selling at higher levels. On the other hand, the euro continued benefitting from the EU's agreement on €750 billion pandemic recovery fund.

The shared currency got an additional boost following the release of the German GFK Consumer Confidence Survey, which rose to -0.3 for August from a revised -9.4 in the previous month. This marked the third monthly increase in a row and assisted the EUR/USD pair to attract some dip-buying near the 1.1540 region. The subsequent positive move took along some short-term trading stops placed near the 1.1600 mark and pushed the pair to its highest level since September 2018.

Meanwhile, the USD failed to gain any respite from Thursday's release of Initial weekly Jobless Claims, which unexpectedly increased to 1.1416 million as compared to the previous week’s 1.307 million. The data further raised speculations that the economic recovery in the US could be grinding to a halt and led to a bit of caution. This coupled with a fresh leg down in the US equity markets extended some support to the greenback and capped any further move up for the major.

The pair finally settled around 30 pips from daily swing highs and was seen oscillating in a narrow trading band through the Asian session on Friday. Market participants now look forward to the key PMI reports from the Eurozone, which should influence the common currency and provide some impetus. Later during the early North American session, the flash version of the US PMI prints and New Home Sales data might further contribute to produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the near-term bias seems tilted firmly in favour of bulls. However, the pair’s inability to capitalize on the move/sustain above the 50% Fibonacci level of the 1.2555-1.0636 downfall warrant some caution before placing aggressive bullish bets amid overbought conditions on the daily chart. That said, some follow-through buying beyond the overnight swing high, around the 1.1625 region, now seems to accelerate the momentum towards the 1.1700 round-figure mark. The pair might then aim to test the next major hurdle near the 1.1745-50 region.

On the flip side, immediate support is now pegged near the 1.1540 level, below which the pair could accelerate the slide further towards the key 1.1500 psychological mark. Failure to defend the mentioned support levels might prompt some technical selling, though any subsequent slide might still be seen as a buying opportunity. The emergence of dip-buying should help limit the downside near the 1.1430 horizontal support.