The EUR/USD pair displayed a modest rebound during the early European session on Wednesday, recovering from weekly lows of 1.0821 to trade at 1.0862. Nevertheless, the potential for further upside appears restricted as investors exercise caution in anticipation of the European Central Bank‘s (ECB) impending interest rate decision scheduled for Thursday.
Prior to the pivotal ECB event, market attention will be on the preliminary Eurozone Purchasing Managers Index (PMI). Forecasts indicate an improvement in the Composite PMI from 47.6 to 48.0 in January, with the Manufacturing PMI expected to rise to 44.8 and the Services PMI projected to grow to 49.0.
Analyzing the four-hour chart, the bearish sentiment persists for EUR/USD, as it remains below the 50- and 100-period Exponential Moving Averages (EMA) with a downward slope. The Relative Strength Index (RSI) adds to the bearish narrative by residing in the bearish territory below the 50 midlines, indicating a favorable outlook for further decline.
Immediate resistance is noted at the 50-period EMA at 1.0895, while a crucial upside barrier lies at 1.0915, marked by the confluence of the upper boundary of the Bollinger Band and the 100-period EMA. Subsequent hurdles include a high from January 15 at 1.0967 and the psychological round figure of 1.1000.
Conversely, initial support is identified near the lower limit of the Bollinger Band at 1.0840. Additional downside protection includes the low of January 23 at 1.0820, with further support levels located near a low from December 13 at 1.0773. Traders are advised to navigate these key levels carefully as market dynamics evolve amid the upcoming ECB decision.