Technical Analysis

EUR/USD Price Analysis – Aug 04, 2023

By LonghornFX Technical Analysis
Aug 4, 20233 min

Daily Price Outlook

The EUR/USD currency pair has been unable to maintain its upward momentum and has recently lost some traction, currently trading at the level of 1.0943. Investors seem cautious and showing hesitancy in making strong bids due to the mixed market sentiment, which has been driven by the anticipation of crucial economic data releases from the US. Furthermore, the Eurozone's Retail Sales for June experienced a decline of 0.3% every month, falling short of the expected 0.2% growth. This disappointing economic data has further weakened the position of the EUR/USD pair in the market.

European Central Bank (ECB) Rate Hike Impact on EUR/USD Pair

The European Central Bank (ECB) increased interest rates by 0.25% to 4.25%. ECB President Christine Lagarde aims to achieve a 2% inflation target in the medium term. ECB member Fabio Panetta supports keeping higher interest rates for a while, balancing inflation risks with a weak economy to support growth.

These decisions can impact borrowing costs, savings, and overall economic conditions in the eurozone. The rate hike may attract investors to the Euro due to higher returns, potentially strengthening the currency against the US Dollar and appreciating the EUR/USD pair. Notably, the ECB's goal is to manage inflation and support economic growth in the eurozone.

Recent Economic Data Highlights Mixed Picture of Eurozone's Economy

According to recent data, Germany's Factory Orders have shown positive growth, increasing by 3.0% YoY and 7.0% monthly, signaling strength in the manufacturing sector. However, the Eurozone's Producer Price Index (PPI) for June dropped to its lowest level in three years, showing a decline of -3.4% YoY. Additionally, the HCOB Composite PMI for the bloc fell from 48.9 to 48.6, and the services PMI declined from 51.1 to 50.9 in July. These figures present a mixed picture of the Eurozone's economy, with signs of improvement in manufacturing but challenges in other sectors.

Impact of Upcoming US Data on USD and EUR/USD Pair

Looking forward, traders are awaiting the release of US wage inflation and employment data, which will likely influence the Federal Reserve's decisions on rate hikes. These decisions will have a direct impact on the US Dollar's performance and may exert pressure on the EUR/USD pair. Moreover, the focus will be on key indicators like Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings, providing trading opportunities for those interested in the EUR/USD pair.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis

EUR/USD continues its intriguing journey as it tests the crucial resistance level at 1.0955. Despite its efforts to breach this pivotal point, the pair has managed to hold on below it, keeping the downward trend intact. Traders eagerly await the next move, with potential targets at 1.0880 and 1.0835, making for an exciting market outlook.

Adding to the intrigue, the Stochastic indicator has lost its positive momentum and entered overbought territory, providing further support for the resumption of the downward trend. However, it's important to keep an eye on potential game-changers – a breakthrough of 1.0955, followed by 1.0990, could effectively thwart the negative scenario and redirect prices towards the main upward trend.

As we gear up for today's trading, the anticipated range stands between the support level of 1.0850 and the resistance level of 1.1000. The excitement builds as we navigate the potential twists and turns of the market!



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