Technical Analysis

EUR/USD Price Analysis – May 23, 2023

By LonghornFX Technical Analysis
May 23, 20233 min

Daily Price Outlook

The EUR/USD currency pair continues its bearish rally, remaining well below the 1.0800 mark and further losing ground. It reached an intraday low of approximately $1.0785, marking its second consecutive day of decline.

The downward trend can be attributed to various factors, including the strength of the US dollar, mixed Eurozone PMI data, and conflicting economic indicators from Germany.

These factors have generated uncertainty among traders, contributing to the ongoing downward pressure on the currency pair.

Investors are closely monitoring the ongoing negotiations between US President Joe Biden and House of Representatives Speaker Kevin McCarthy, recognizing the potentially significant implications for the currency pair.

The outcome of these negotiations is being closely watched as it has the power to influence the dynamics of the EUR/USD currency pair in the near future.

Eurozone Manufacturing Sector Contracts, German Services Show Strength: Impact on EUR/USD Pair

According to the latest survey by HCOB, the Eurozone manufacturing sector experienced a significant contraction in May. The Eurozone Manufacturing Purchasing Managers Index (PMI) dropped to a three-year low of 44.6, falling below expectations and the previous reading of 45.8.

Additionally, the Services PMI declined to 55.9, reaching a two-month low. The overall Eurozone PMI Composite also fell to 53.3, below expectations and hitting a three-month low.

In contrast, the German manufacturing sector saw a deeper contraction, with the Manufacturing PMI hitting a 36-month low of 42.9.

However, the services sector showed resilience, as the Services PMI rose to 57.8, reaching the highest level in 21 months. Overall, the HCOB Preliminary Germany Composite Output Index performed well, reaching a 13-month high of 54.3.

As a result, the Eurozone manufacturing contraction and the decline in Services PMI could potentially have a negative impact on the EUR/USD currency pair.

On the other hand, the strength in the German services sector and the positive performance of the HCOB Preliminary Germany Composite Output Index might offset some of the negative effects.

 EUR/USD Price Chart - Source: Tradingview

EUR/USD – Technical Outlook

Examining the key technical indicators, the Relative Strength Index (RSI) suggests a selling sentiment as it hovers around the 42 levels. On the other hand, the Moving Average Convergence Divergence (MACD) remains above zero, indicating a bullish bias in the market. Overall, there is an interesting mix of signals from the leading indicators.

However, the 50-day exponential moving average supports the 1.0790 level, while the current market price is around 1.0800. Unless the EUR/USD breaks above the 1.0820 level, maintaining a short position is possible.

Therefore, the recommended strategy for today is to consider selling below the 1.0825 level, with an initial target set at 1.0760. A stop-loss order can be placed around the 1.0850 level.


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