EUR/USD Price Analysis – Nov 13, 2023

Daily Price Outlook

During the European trading session on Monday, the EUR/USD currency pair maintained its upward momentum and gained traction for a second consecutive day. However, the reason for its upward trend can be attributed to the bearish sentiment surrounding the US Dollar. Moving forward, investors seem hesitant to place strong positions, given that the European Commission is set to release Economic Growth Forecasts later on Monday, with anticipated downward revisions to 2024 growth.

Impact of US Consumer Sentiment and Inflation Data on EUR/USD Pair

It's worth noting that the University of Michigan Consumer Sentiment index dropped to 60.4 in November from October's 63.8. On the inflation front, the 12-month expectations edged up to 4.4% from 4.2%, while the 5-year outlook jumped to 3.2% from 3.0%.

All eyes are on the upcoming October Consumer Price Index (CPI) report. If it indicates stronger inflation than expected, there is a chance the Federal Reserve will consider another interest rate hike in December. Federal Reserve Chair Jerome Powell underscored last week that, if necessary, the central bank will not hesitate to implement further policy adjustments.

Hence, the decline in the University of Michigan Consumer Sentiment Index and potential inflation concerns in the US could weaken the US dollar. This, coupled with expectations of a Fed rate hike, might lead to a stronger EUR/USD pair.

Impact of European Economic Outlook on EUR/USD Pair

Moreover, the European Commission is set to reveal Economic Growth Forecasts later today, and experts predict a downward adjustment for 2024 growth. Keep an eye out for the initial report on the Eurozone's Gross Domestic Product (GDP) for the third quarter (Q3). Quarterly numbers are expected to show a slight contraction of 0.1%, while the annual figure is anticipated to grow by 0.1%.

Hence, the anticipated downward revision in European economic growth forecasts and the expected contraction in Eurozone GDP for Q3 will likely exert downward pressure on the EUR/USD pair.

EUR/USD - Technical Analysis

The Euro has been showcasing a modest momentum against the US Dollar, hovering around the 1.0687 mark, a level that presents both an opportunity and a challenge for traders looking to gauge the currency pair's next significant move. This level marks a critical juncture as it aligns closely with the 50-period Exponential Moving Average (EMA), currently at 1.0683, which often acts as a dynamic inflection point for price action.

From a broader perspective, the EUR/USD pair remains within a trading pattern that could be characterized as a consolidation phase following its recent ascent. The Relative Strength Index (RSI) on the 2-hour chart reads at 47.04, reflecting a market that is neither overbought nor oversold, thereby suggesting a possible equilibrium between buyers and sellers at this stage.

Looking at the structure of recent price movements, key resistance levels are identified at 1.0725 and 1.0750. These thresholds represent potential turning points that could either reaffirm the current upward trend or signify a reversal if met with sufficient selling pressure. Conversely, immediate support is found at 1.0658, with subsequent foundational levels at 1.0625 and 1.0591. These levels are critical for traders to monitor, as a breach below could indicate a shift towards a bearish outlook for the pair.

While the technical indicators currently paint a picture of neutrality, the slightest shift in market dynamics could tip the scales. For instance, upcoming economic announcements or shifts in monetary policy could inject volatility into the market, prompting a decisive move beyond these key technical levels.

In summary, the EUR/USD currency pair is at a crossroads, with technical indicators suggesting a neutral stance in the short term. However, the proximity to the 50 EMA and the RSI's middle ground reading leaves room for potential swings in either direction. Traders will likely look to macroeconomic cues for further guidance.

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