EUR/USD Price Analysis – Oct 18, 2023

Daily Price Outlook

The EUR/USD currency pair continued its lackluster performance on Wednesday, as it witnessed a decline to approximately 1.0550 against the US Dollar. However, this dip can be attributed to the selling pressure on the Euro, which resulted in marginal losses in its value when compared to the US Dollar. Concurrently, European stocks faced a challenging day, with many of them ending in the "red," signaling losses in their values.

However, this downward movement was partially influenced by the strength of the US Dollar, as the USD Index (DXY) maintained its bullish trend in the low 106.00s.

US Dollar Holds Steady Amid Global Uncertainty and Fed Expectations

It's noteworthy that the US Dollar, as gauged by the USD Index (DXY), is holding its ground in the low 106.00s. This stability comes amid uncertain global market conditions, reflecting a prevailing sense of caution due to escalating geopolitical risks. In the meantime, investors anticipate the Federal Reserve (Fed) will maintain its current stance of keeping interest rates unchanged for the remainder of the year.

Looking ahead to the upcoming economic data, investors will keep a close eye on the weekly Mortgage Applications, as well as Housing Starts and Building Permits. These are expected to be important topics of discussion within the housing sector.

Speculation About ECB Policy Pause and Impact on EUR/USD

Moreover, there is ongoing speculation surrounding whether the European Central Bank (ECB) might decide to refrain from making adjustments to its policies. This is occurring despite inflation surpassing the bank's target, and there is a growing concern about the potential for an economic downturn or the emergence of stagflation, which is a combination of stagnation and inflation, within the European region.

On the data front, the latest inflation rate for September in the broader Eurozone revealed that the Consumer Price Index (CPI) increased by 4.3% compared to the previous year. When we exclude the costs of food and energy, which is known as Core CPI, the rate surged even higher to 4.5% on a year-over-year basis. Investors are now speculating that the European Central Bank (ECB) might delay its plans to tighten monetary policy until the third quarter of 2024.

Therefore, the speculation of the ECB pausing policy adjustments, even in the face of elevated inflation and economic worries, may potentially undermine the Euro (EUR) and influence the EUR/USD pair, potentially shifting it in favor of the US Dollar (USD).

EUR/USD - Technical Analysis

The EUR/USD, often termed the "Fiber" in trading parlance, has been a critical barometer of the U.S. and Eurozone economic strengths. As of this analysis for October 18, the pair is trading at 1.05777, marking a modest ascent of 0.17% in the last 24 hours.

Our immediate pivot point is identified at 1.0596. In terms of resistance, traders should cast their eyes on 1.0632, followed by a more challenging ceiling at 1.0672, and possibly up to 1.0713. On the flip side, supports are solidly placed at 1.0535, dipping further to 1.0496, and then a more substantial floor near 1.0454.

In the technicals, the RSI stands at 56, leaning more towards a bullish sentiment as it's above the 50 threshold, yet not in the overbought territory. The MACD provides further bullish confirmation, with its line being above the signal, hinting at potential upward momentum. Additionally, the current price comfortably sits above the 50 EMA, located at 1.0559, further endorsing the bullish narrative in the short term.

In terms of chart patterns, while none is explicitly stated, traders should remain vigilant for any emerging patterns or structures that may offer additional insights into future price direction.

For now, the trend for EUR/USD appears bullish, especially as prices maintain above the 1.0559 mark

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