Technical Analysis

EUR/USD Price Analysis – Sep 07, 2023

By LonghornFX Technical Analysis
Sep 7, 20233 min

Daily Price Outlook

The EUR/USD currency pair is on a downward trend and recently hit an intraday low around 1.0718. However, the decline is mainly due to disappointing Eurozone data, causing EUR/USD to drop by 0.14% to 1.0709 level. It is worth noting that the shared currency is under pressure because the European Central Bank (ECB) is in a silent period before its upcoming monetary policy meeting, creating uncertainty.

Furthermore, concerns about a Eurozone recession contrast with the more positive outlook for the US economy, fueled by discussions of a softer landing. These contrasting economic situations are causing the major currency pair (EUR/USD) to remain weak, with traders closely watching for important economic data like Germany's Industrial Production numbers for July and the final Eurozone Gross Domestic Product (GDP) figures for the second quarter (Q2) to get a better sense of the economic trends in these regions.

Eurozone's Q2 2023 GDP Growth Falls Short of Expectations

According to the final estimate by Eurostat, the Eurozone's economy grew less than anticipated in the second quarter of 2023. The Gross Domestic Product (GDP) for the region expanded by just 0.1% in the quarter ending June, compared to the initial estimate of 0.3% and market expectations of the same figure. On an annual basis, the Eurozone's GDP grew by 0.5%, lower than the initially estimated 0.6% and below market expectations of a 0.6% increase. Hence, this disappointing economic data has put additional selling pressure on the Euro, causing the EUR/USD currency pair to drop by 0.14% to a trading rate of 1.0709.

German Industrial Production Declines in July, Weighs on Euro

Elsewhere, official data revealed that German Industrial Production in July fell more than anticipated, signaling further challenges in the country's manufacturing sector. Industrial output in Germany, a key player in the Eurozone, declined by 0.8% on a month-on-month basis, according to figures adjusted for seasonal and calendar effects, compared to the expected -0.5% and the previous month's -1.4%.

On an annual basis, Germany's Industrial Production decreased by 2.1% in July, in contrast to a 1.5% drop in June. Therefore, these weak industrial numbers have left the Euro vulnerable against the US Dollar, with the EUR/USD currency pair slipping by by 0.14%.

US Dollar Gains Strength on Positive Economic Indicators and Global Concerns

Across the ocean, the US Dollar found support from a surprisingly positive ISM Services PMI. This, along with optimistic statements from the Federal Reserve about the US economy's strength, made people more comfortable with the idea of higher interest rates and a smooth economic transition, as suggested by the Fed's Beige Book. Furthermore, the ongoing tensions between the US and China over trade and Taiwan, plus worries about weaker economies in other major countries, boosted the demand for the US Dollar. This weighing on the EUR/USD pair.

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

EUR/USD - Technical Analysis

The EUR/USD pair continues its bearish trajectory, approaching our primary forecasted level at 1.0700. As the market opened, the currency exhibited a lateral movement, signaling an anticipation of further bearish momentum to guide the price towards its subsequent target at 1.0635.

The descending channel remains a dominant factor in steering the anticipated bearish movement, further bolstered by the consistent influence of the EMA50. It's crucial to underscore that sustaining this bearish course hinges on the price maintaining below the thresholds of 1.0785 and 1.0815.

Today's trading parameters are projected to span from a support level at 1.0635 to a resistance level at 1.0785.



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