EURUSD Defends 1.05 For Now

 It looks like bears have no more strength to push the price below the essential 1.05 support.

Global situation poses risks

As coronavirus-related limitations in China continue to impact global trade volume, market participants are growing increasingly anxious about a worldwide economic downturn. Despite a drop in the number of cases in Shanghai, officials are said to have tightened restrictions as the government intends to enforce its "zero-COVID policy." 

Furthermore, persisting supply-chain difficulties are predicted to keep global inflation rising for longer than anticipated. Meanwhile, there are no signs of the Russia-Ukraine conflict de-escalating.

EU data exceeded expectations

Despite approaching recession fears, the German ZEW headline survey for May indicated that the Economic Sentiment Index improved, coming in at -34.3 from -41.0 before, exceeding predictions of -42.0 by a considerable margin.

Additionally, the Eurozone ZEW Economic Sentiment Index was -29.5, up from -43.0 the previous month and -41.0 anticipated.

"Compared to the previous month, the outlook is less pessimistic about Germany's economic situation. Moreover, A large majority of the experts assume an increase in short-term interest rates by the ECB in the next six months," the survey said

Oversold conditions

Overall, the EURUSD pair seems heavily oversold, likely prompting a short-squeeze relief rally. The short-term resistance is found near 1.0630, and should the euro rally above that level; we might see further upside pressure, targeting 1.0760.

On the other hand, if EURUSD drops below 1.05, further decline would likely be inevitable, with a possible drop toward 1.03 in the initial reaction.