EUR/USD Price Analysis – Aug 18, 2023

Daily Price Outlook

The EUR/USD currency pair managed to halt its recent losses and started gaining momentum, hovering above the range of 1.0885 to 1.0890. It rose by 0.15% over the course of the day. However, the reason for its upward rally could be attributed to the slight decrease in the value of the US dollar. The broad-based US dollar is losing traction and remains sluggish for the second successive day in the wake of retreating US Treasury bond yields and cautious stance ahead of the upcoming Jackson Hole Symposium. This turned out to be a key factor lending some support to the EUR/USD pair.

In contrast to this, the Federal Reserve's more hawkish stance on interest rates might prevent a significant decline in the USD and limit the gains for the EUR/USD pair. Looking forward, traders are focusing on a speech scheduled by the European Central Bank's (ECB) Lane, as well as the final Euro Zone Consumer Price Index (CPI) figures. These events are expected to provide additional momentum and direction for the currency pair.

US Dollar Trends, Fed Expectations, and Economic Conditions

The broad-based US Dollar has been under pressure for two consecutive days due to lower US Treasury bond returns. This has given some support to the EUR/USD pair, indicating the Euro's relative improvement against the Dollar. However, there's a growing belief that the US Federal Reserve will maintain higher interest rates for an extended period.

This sentiment had driven the yield on the primary 10-year US government bond to its highest point in ten months on Thursday. Although US consumer prices saw a moderate rise in July, the struggle to achieve the Fed's 2% target and concerns about global economic conditions persist.

Market Focus and Expectations for EUR/USD

Furthermore, there is talk that the European Central Bank (ECB) could pause its streak of raising interest rates nine times in a row by September. This could prevent the EUR/USD pair from rising much more. So, it's wise to wait for clear signs of strong buying before thinking the recent drop over the last month is over and expecting more gains.

Meanwhile, the final Euro Zone CPI numbers and Lane's speech could change how the Euro does against the Dollar. On the other side, there's no important economic info coming from the US on Friday, so the Dollar will be affected by how US bond yields change.

EUR/USD - Technical analysis

The EUR/USD pair is currently hovering around the 1.0880 mark, and its recent closure beneath this level sustains the bearish outlook for the foreseeable future. The subsequent target is set at 1.0785.

The influence of the EMA50 remains bearish, exerting downward pressure on the price and reinforcing the projected downtrend. This assessment is further supported by the presence of a double top pattern on the chart. It's noteworthy that a solid consolidation above 1.0880 would negate the negative scenario and potentially initiate a recovery phase, with an initial target at the 1.0955 level.

For the current day, the expected trading range spans between the support at 1.0790 and the resistance at 1.0950.