Technical Analysis

EUR/USD Price Analysis – Oct 23, 2023

By LonghornFX Technical Analysis
Oct 23, 20234 min

Daily Price Outlook

The EUR/USD pair couldn't break its downward trend and continued to fall in the early European session on Monday. It slipped below the psychologically important 1.0600 level, mainly due to the strengthening US dollar. It's currently trading around 1.0586, marking a 0.07% loss for the day. However, this decline is linked to strong economic data from the United States and robust US Treasury yields, both of which are boosting the US Dollar (USD) and causing losses in the EUR/USD pair.

Meanwhile, Federal Reserve (Fed) Chair Jerome Powell and other Fed officials have indicated that interest rates will remain unchanged at their November meeting. Market participants are now awaiting data releases from both the Eurozone and the US in anticipation of the upcoming European Central Bank (ECB) meeting on Thursday.

Economic Insights and Geopolitical Concerns for the Euro

It's important to mention that economists surveyed by Reuters believe that the European Central Bank (ECB) has completed its interest rate hikes and isn't anticipated to implement any rate cuts until at least July 2024. This decision is driven by the ongoing efforts to combat high inflation.

Furthermore, the European Union is considering an extension of the cap on gas prices imposed back in February. However, this decision is mainly driven by concerns over the potential increase in gas prices during the upcoming winter, primarily due to the Middle East crisis and the disruption of a Baltic pipeline. Hence, these concerns will likely exert downward pressure on the Euro.

Moreover, ongoing tensions in the Middle East may impact the market. If these uncertainties grow, it could make investors less interested in the riskier currency like Euro.

Federal Reserve's Stance on Interest Rates

Moreover, Federal Reserve (Fed) Chair Jerome Powell, along with numerous Fed officials, has indicated that they are unlikely to make any changes to interest rates during their November meeting. Powell's intention is to temporarily halt the rate hikes, closely monitoring the economy's performance in the coming months. He did mention that they might consider tightening monetary policy more if they see strong economic growth or if the job market stops improving.

In addition, Atlanta Fed President Raphael Bostic believes that it's unlikely the US central bank will lower rates before the middle of next year. Fed Philadelphia President Patrick Harker is sticking to his preference for keeping interest rates where they are. Fed Cleveland President Loretta Mester thinks they might have reached the peak of the rate hike cycle. Consequently, it appears that the Federal Reserve is currently in a holding pattern with regards to interest rates.

Therefore, the news of the Fed's cautious approach to interest rates has the potential to weaken the US dollar. This, in turn, could make the EUR/USD pair more appealing to investors, potentially resulting in an increase in its value.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

In the sphere of foreign exchange, the EUR/USD remains one of the most scrutinized currency pairs, offering a window into the dynamics between two of the world's most significant economies. As of today, the pair is trading at 1.0575, marking a decrease of 0.14%. Observations from a 4-hour chart provide a comprehensive understanding of its potential trajectory.

The fulcrum of our analysis, the pivot point, is placed at 1.0561. Above this, the immediate resistance level is at 1.0601. If the currency pair gains traction, subsequent resistances are seen at 1.0638 and 1.0672. In contrast, if the bears exert pressure, an immediate floor is present at 1.0524, followed by support levels at 1.0491 and 1.0450.

Turning our attention to the technical indicators, the Relative Strength Index (RSI) stands at 51. Typically, an RSI above 70 is indicative of overbought conditions, whereas a reading below 30 flags oversold territory. An RSI hovering around the midpoint of 50 suggests a relatively balanced market sentiment, with a slight bullish inclination given its position just above 50.

The Moving Average Convergence Divergence (MACD), another pivotal indicator, reports a value of 0.00009 with its signal line at 0.00074. While the MACD line currently lies below the signal line, it's crucial to monitor this relationship closely as a potential crossover could hint at shifting momentum.

Lastly, the 50-Day Exponential Moving Average (EMA) for the pair is currently at 1.0566, just below the current trading price. This close alignment indicates a potential tussle between buyers and sellers, with neither side holding a decisive edge at the moment.

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