- The euro dollar price appears to have passed its “peak weakness” moment against the US dollar, as the technical setup suggests that it could remain supported in a week filled with economic data releases and the Federal Reserve’s interest rate decision.
- So far, since the start of this week's trading, the price of the EUR/USD has been trying to rebound upward with gains that reached the 1.0625 resistance level before settling around the 1.0600 level, at the time of writing the analysis, when is prior to the announcement of inflation and growth figures for the Eurozone.
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What Analysts Say
Commenting on the performance of the currency pair, Christopher Romano, a market analyst at Reuters, said that the technical setup for the euro/dollar exchange rate appears to have turned higher after the pair broke a downtrend that has seen 11 straight weeks of losses. He added: “The EUR/USD pair broke above the downtrend line from the July peak and has remained above it since then, and a monthly Doji candlestick was formed. Ended his comment by saying “These signals indicate that the EUR/USD decline from the July high may be at an end.”
For his part, Sean Osborne, senior forex analyst at Scotiabank, says that the modest gains from support at the low 1.05 area in the latter part of last week give the short-term chart a slightly positive tinge. However, he would like to see further gains in the short term to give more confidence that the recovery can extend over the coming days. Finally, “At this point, the best we can say from a technical point of view is that the euro selling has stopped.”
Price action in the previous week was helpful as EUR/USD showed resilience despite the European Central Bank's decision to hold interest rates on a day when the US posted a surprisingly strong GDP reading. In an analysis note from UBS, “The euro has reached a weak point, where only very negative catalysts can lead to a further decline. Therefore, we continue to see strong support around 1.04 against the USD, and we expect EUR/USD to trade in the 1.04-1.08 range in the coming months.”
The highlight for the euro this week is the release of Eurozone inflation figures for October, which may help the market bolster its expectations regarding the increasingly important interest rate decision that the European Central Bank will make on December 14. Also, the Eurozone PMI is expected to be released on Tuesday at 11:00 GMT, with the headline rate expected to reach 3.4% year-on-year, down from 4.3% previously. Ultimately, the all-important core CPI is expected to come in at 4.2%, down from 4.5%.
The rule of thumb is that a strong set of inflation numbers increases the odds of the ECB taking a “hawkish” tone in December, which supports the euro. But faster-than-expected declines may see the ECB highlight relief that prices are comfortably on track to fall back to target. Consequently, this would increase the likelihood of interest rate cuts in the first half of 2024, which in turn could affect the euro.
Preliminary euro zone GDP figures for the third quarter along with inflation figures are also due on Tuesday, with markets looking for a 0.2% year-on-year increase in the second quarter. Meanwhile, the figure on a quarterly basis is expected to be -0.1%, and the euro is likely to find some support at any higher reading. Additionally, he expects weakness if the data disappoints, as this would reinforce the ECB's "dovish" case in December.
EUR/USD Today Expectations and Analysis
Despite the rebound attempts, the general and broader trend of the EUR/USD is still bearish, and the trend will not be broken without the currency pair moving towards the resistance levels of 1.0730 and 1.0800, respectively. Therefore, according to the performance on the daily chart below, On the other hand, over the same period, there will be an opportunity to return to the psychological support area of 1.0500 if the economic data and the US Central Bank’s decisions are supportive of the path of tightening and raising US interest rates in the coming months.
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