EUR/USD Price Analysis – Oct 16, 2023

Daily Price Outlook

The EUR/USD currency pair began the week positively, rebounding from a one-week low just below the psychological mark of 1.0500 after two consecutive days of losses. This upward trend is largely attributed to the lackluster performance of the US Dollar, which, in turn, is providing some support to the EUR/USD pair. In contrast to this, there is still the expectation of at least one more interest rate hike by the Federal Reserve in 2023, which is good news for the dollar and could limit the euro's upward momentum.

Another factor that could cap further gains in the EUR/USD pair is the belief that the European Central Bank won't be raising interest rates in the near term. This may prevent bullish movements in the shared currency. So, while the EUR/USD pair has shown some positive momentum, it's crucial to exercise caution when making significant predictions.

Factors Influencing the US Dollar and EUR/USD Pair

The broad-based US dollar struggled to maintain its upward momentum on Monday. Despite gaining strength due to recent US Consumer Price Index (CPI) data, it failed to capitalize on those gains. This lack of a clear upward trend offered some support to the EUR/USD pair. However, the reason for its mixed stance is the expectation that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. This expectation was reinforced by the latest US consumer inflation data released last Thursday, which exceeded the Fed's target and kept the possibility of at least one more Fed rate increase in 2023 alive.

Despite experiencing downward pressure, the US dollar is managing to mitigate its losses thanks to several factors. These include elevated US Treasury bond yields, dovish comments from Fed officials suggesting that interest rates may remain unchanged for a second consecutive month in November, and a positive outlook in the US equity futures market, which is weakening the dollar's safe-haven appeal. However, speculation that the European Central Bank (ECB) will not raise rates anytime soon is limiting the gains for the EUR/USD pair.

European Central Bank's Stance and Christine Lagarde's Caution

On the other hand, the European Central Bank (ECB) made it clear in September that their recent interest rate hike, the 10th in a 14-month-long battle against inflation, is likely the last one for now. Additionally, ECB policymakers expressed cautious optimism last week, indicating that they believe inflation might return to 2% without requiring further rate hikes.

Furthermore, ECB President Christine Lagarde addressed the International Monetary Fund's meeting over the weekend. She noted that if the impact of monetary policy proves to be more potent than anticipated, or if the global economy further weakens and geopolitical risks escalate, it could potentially impede economic growth. This cautious statement is essential for those who are speculating on the EUR/USD increase.

EUR/USD - Technical Analysis

On October 16, the EUR/USD currency pair marked a value of 1.05248, illustrating a marginal ascent of 0.20%. Over a four-hour chart timeframe, critical data points emerge, illuminating potential future movements.

Starting with pivotal data points, the pair's current pivot point stands at 1.05495. Looking ahead, resistance levels manifest at 1.06018, 1.06912, and 1.07457. Conversely, support tiers for the asset are marked at 1.04558, followed closely by 1.04035 and extending to 1.0312.

Delving into the technical indicators, the Relative Strength Index (RSI) registers at 41, which, while not indicating overbought conditions, suggests the pair is leaning toward the bearish spectrum. The Moving Average Convergence Divergence (MACD) showcases a value of -0.0009, with its signal counterpart at -0.0014. This alignment hints at the MACD line having recently ventured above the signal line, insinuating possible upcoming bullish momentum.

Furthermore, the 50-Day Exponential Moving Average (EMA) posts a value of 1.05601. Interestingly, the current price lies below this EMA value. Traditionally, when a price positions itself below the 50 EMA, it often indicates a short-term bearish trend. Therefore, traders should tread cautiously and monitor subsequent movements closely.

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