EUR/USD Price Analysis – Oct 06, 2023

Daily Price Outlook

Despite positive economic data from Germany, the EUR/USD currency pair is y moving lower after two days of gains. It is now trading slightly lower at around 1.0540 during the European session on Friday. However, this drop could be because the European Central Bank (ECB) is expected to keep its current interest rates unchanged, which is weighing on the shared currency and contributing to the EUR/USD pair losses. Meanwhile, the broad-based US Dollar strength has played its major role in undermining the EUR/USD currency pair.

Notably, the EUR/USD pair is facing downward pressure before the release of US economic data. As of now, the EUR/USD pair is down by 0.09% on the day, trading at 1.0535.

German Industrial Orders Improve, ECB's Future Stance on Rates

According to data from the Federal Statistics Office of Germany, factory orders in August bounced back strongly, indicating a positive trend in the country's manufacturing sector. On a monthly basis, orders for German-made goods surged by 3.9%, surpassing expectations of a 1.8% increase and reversing a previous decline of -11.3%.

Industrial orders in Germany showed a notable improvement in August when we compare them to the same period last year. In August, they declined by 4.2%, which represents a significant improvement compared to the steep 10.1% drop observed in July. Additionally, Germany's trade surplus for August did experience a slight dip, decreasing from €17.7 billion in July to €16.6 billion. However, it still exceeded the market's anticipated figure of €15.0 billion.

Looking ahead, the European Central Bank (ECB) is expected to keep its current interest rates unchanged at 4.50% in the upcoming meeting later this month. Insights from ECB Governing Council member Mario Centeno on Wednesday indicated that inflation in the Eurozone is declining faster than previously expected. This suggests that the current rate cycle may have come to an end given the prevailing economic conditions.

US Dollar Rebounds and Treasury Yields Hold Steady: Impact on EUR/USD

Furthermore, the broad-based US dollar, measured by the US Dollar Index (DXY), is making a comeback, currently trading at around 106.50. This follows a recent climb to an 11-month high earlier in the week. US Treasury yields are holding steady, hanging near their highest levels in years. Investors are being cautious due to the US Federal Reserve's (Fed) tough stance on interest rates. The 10-year US Treasury yield is still above 4.70%, close to its highest since 2007.

On the data front, US Initial Jobless Claims for the week ending September 29 increased slightly to 207K, surpassing the expected 210K. On a positive note, US Challenger Job Cuts decreased significantly from 75.151K to 47.457K in September. Investors are waiting for the upcoming release of US Nonfarm Payrolls and Average Hourly Earnings, expected to confirm the strong job market. Good numbers might boost the US dollar and increase losses in the EUR/USD pair.

EUR/USD - Technical Analysis

As of October 6, the EUR/USD pair trades at 1.07179, a key point evident in the 4-hour chart. The pivot point for this currency pair stands at 1.0646. In the event of a bullish drive, traders should be observant of the immediate resistance positioned at 1.0801, followed by subsequent resistances at 1.1037 and 1.1195. For those with a bearish outlook, immediate support lies at 1.0407, with further supports anchored at 1.0252 and the crucial 1.0013 level.

Diving into the technical indicators, the Relative Strength Index (RSI) for EUR/USD stands at 39. This value, being below the midpoint of 50, showcases a bearish sentiment. However, it's worth noting that values nearing 30 are indicative of potentially oversold market conditions, which might hint at a reversal or consolidation soon. As for the MACD, the value stands at 0.00013 compared to its signal line at 0.00764. This close proximity suggests a potential crossover, which traders typically use to gauge momentum shifts.

Further supporting the analysis, the price of the EUR/USD is juxtaposed against the 50-Day Exponential Moving Average (EMA), currently positioned at 1.0534. The current price stance relative to this EMA can provide insights into the short-term trend. Moreover, our chart analysis reveals a downward channel with resistance extending at $1.0550.

The 50 EMA, suggesting selling opportunities, aligns closely at 1.0542. These combined elements suggest a bearish undertone in the market.

In conclusion, the EUR/USD's prevailing trend looks bearish, especially if the pair continues to navigate below the 1.0540 mark.

Should it breach this pivotal level, the dynamics could shift in favor of the bulls. As for the short-term trajectory, depending on its behavior near the 1.0540 pivot, the EUR/USD could either challenge the immediate resistance at 1.0801 or find solace near the 1.0407 support in the upcoming trading sessions.

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