EUR/USD Price Analysis – Aug 21, 2023

Daily Price Outlook

The EUR/USD currency pair starts the week with a slight rise, hovering around 1.0880, indicating that the Euro is gaining a little strength against the US Dollar. Although, traders and investors are seems cautious to place any strong bid as they are anticipating the release of the German Producer Price Index (PPI). This PPI data is important because it provides insights into economic trends.

Investors are excited and anxious to see how the PPI results will impact the EUR/USD currency pair, as it could push the pair's movement in different directions, prompting market participants to closely watch on the outcome.

Eurozone Economic Indicators and Central Bank Dynamics

According to the latest reports, the Eurozone's economy grew by 0.3% in the second quarter of this year, which was in line with expectations. On a yearly basis, the growth was 0.6%. Meanwhile, the good news also came from the manufacturing sector, as industrial production increased by 0.5% in June, beating predictions. This helps ease concerns about rising prices, as July's inflation rate was 5.3%, a bit lower than before.

Hence, the Eurozone's positive economic indicators, including GDP and industrial production, along with lower inflation, could weaken the Euro against the US Dollar due to reduced pressure on the European Central Bank to raise interest rates. This potential interest rate difference may impact the EUR/USD pair, making the Euro less attractive compared to the dollar.

Focus on Federal Reserve's Actions and Market Response

Across the ocean, market sentiment is experiencing shifts influenced by the Federal Reserve and its monetary policy. Despite a mix of robust labor data and softer inflation figures, investors are increasingly betting on the possibility of additional rate hikes. However, the upcoming speech by Federal Reserve Chairman Jerome Powell holds the potential to be a game-changer for market sentiment.

As traders look to the future, the spotlight turns to the Fed's policy trajectory. Powell's speech is expected to provide crucial insights into the Fed's stance on the economy, inflation, and the potential need for further interest rate adjustments. This event has the power to significantly impact market volatility and steer the direction of the EUR/USD pair.

EUR/USD - Technical analysis

The EUR/USD pair is exhibiting fluctuations near the 1.0880 level, while also making attempts to consolidate below it. Notably, the stochastic indicator is experiencing a decline in its positive momentum, approaching the overbought zones. Meanwhile, the EMA50 is exerting downward pressure on the price.

As a result, we hold the view that the likelihood of a resumption in the anticipated bearish trend remains valid for the upcoming period. The subsequent significant target lies at 1.0785. It's worth considering that a breach of the 1.0880 level could initiate recovery efforts, aiming for testing the 1.0955 mark before a clear trend direction becomes evident.

The trading range expected for today spans between the support at 1.0790 and the resistance at 1.0950.