EUR/USD Price Analysis – Oct 13, 2023

Daily Price Outlook

During the European session, the EUR/USD currency pair maintained its upward trajectory, hovering above the 1.0540 level. However, this uptrend is being supported by a weakness in the US dollar. It should be noted that the concerns surrounding future interest rate hikes by the Federal Reserve have played a major in undermining the US dollar. These concerns are exerting downward pressure on US bond yields and the dollar. Moreover, traders appear hesitant to place strong bullish bets on the euro, possibly due to expectations that the European Central Bank will refrain from further rate increases.

Factors Behind EUR/USD's Recent Volatility

It's important to highlight that on Thursday, the EUR/USD pair witnessed its most significant one-day decline since early October. This drop occurred in response to the release of US consumer inflation data, which raised expectations of another Federal Reserve interest rate hike in 2023. This, in turn, bolstered demand for the US Dollar. Both the headline and Core Consumer Price Index (CPI) figures remained above the Federal Reserve's 2% target, signaling the potential for further tightening of monetary policy.

Although, the losses in the pair were short-lived as it swiftly regained its lost strength amid the recent comments from some Fed officials suggesting that the central bank may be nearing the end of its rate hike cycle, which is keeping a lid on US bond yields and preventing the USD from building on its recent recovery. Furthermore, the modest increase in US equity futures is weakening the safe-haven appeal of the dollar and providing some support for the EUR/USD pair.

ECB's Cautious Stance and Upcoming Market Drivers

Furthermore, European Central Bank (ECB) policymakers have cautiously expressed hope that inflation will reach 2%, even without additional rate hikes. In September, the ECB hinted that its 10th rate hike in a year-long battle against inflation would likely be its last. At the same time, the worry about the economy slowing down and the fear of a recession looming make it less likely for the ECB to raise rates again. This was seen as one of the key factors that kept the lid on any additional gains in the EUR/USD pair.

Looking forward, traders are paying attention to comments from ECB President Christine Lagarde at the World Bank Group and the International Monetary Fund Annual Meeting in Morocco, as her remarks may affect the shared currency and provide momentum to the EUR/USD pair. Besides, they will keep an eye on a speech by Philadelphia Fed President Patrick Harker and the preliminary Michigan Consumer Sentiment Index, which will influence demand for the US dollar.

EUR/USD - Technical Analysis

The EUR/USD pair, as of October 13, stands at 1.05442, reflecting a slight increase of +0.14% over the past 24 hours. This analysis is grounded in a 4-hour chart timeframe.

Pivotal to its price movement is the identified pivot point at 1.0545. From here, traders can anticipate several key resistance and support levels. The immediate resistance hovers at 1.0641, with further resistances at 1.0695 and 1.0793.

Conversely, if the pair retreats, immediate support could be found at 1.0489, followed by stronger supports at 1.0394 and 1.0337.

A glance at the technical indicators furnishes us with additional insights. The Relative Strength Index (RSI) is currently at 42, suggesting a neutral sentiment. The 50-Day Exponential Moving Average (EMA) stands at 1.0570. It's noteworthy that the price is below the 50 EMA, which implies a short-term bearish trend.

Chart patterns are also crucial in predicting future price movements. Currently, the EUR/USD has shown an upward channel breakout at 1.0540. This breakout, combined with the 50 EMA positioning, suggests a selling trend.

In conclusion, the overall trend for the EUR/USD is bearish, particularly if it remains below the 1.0570 mark. Conversely, if the asset surpasses this threshold, we might witness a bullish turn. For the short term, traders should be vigilant for potential fluctuations around these mentioned levels.

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