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  • European Commission revises down the euro area growth forecasts.
  • Economic optimism rises in the U.S. in May.
  • US Dollar Index clings to modest daily gains near 97.70.

After closing the previous day virtually unchanged near the 1.12 handle, the EUR/USD pair failed to make a meaningful move in either direction on Tuesday and is now headed to close the day with modest losses. As of writing, the pair is down 0.17% on the day at 1.1178.

Earlier today, the European Commission in its Spring 2019 Economic Forecast revised down its expectation for the GDP growth to 1.2% in 2019 in the euro area and to 1.5% in 2020. Regarding the downside risks to the outlook, “The risk of protectionist measures worldwide and the current slowdown in world GDP growth and trade could turn out to be more persistent than expected, particularly if growth in China disappoints,” the EC said in its publication.

“There is also the risk that a rise in political uncertainty and less growth-friendly policies could result in a pull-back in private investment.”

On the other hand, concerns over the negative impact of a prolonged trade conflict with the U.S. and China on the global economy forced investors to stay away from risk-sensitive assets and allowed the USD to outperform its major rivals. At the moment, the US Dollar Index is up 0.1% on the day at 97.65.

Today’s data from the U.S., which revealed that the IBD/TIPP’s Economic Optimism Index advanced to its best level in more than 15 years in May, provided an additional boost to the greenback as well.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

The 4 hours chart shows that the early advance also stalled around a bearish 100 SMA, while the pair is now breaking below an also bearish 20 SMA. Technical indicators in the mentioned chart have eased from their highs, the Momentum directionless in neutral territory but the RSI maintaining its bearish slope now at around 47, skewing the risk to the downside for the upcoming sessions.

Support levels: 1.1155 1.1110 1.1085

Resistance levels: 1.1220 1.1250 1.1280