EUR/USD Price Analysis – Sep 08, 2023

Daily Price Outlook

The EUR/USD currency pair managed to halt its previous losing streak and garnered some buying interest during the Asian session on Friday, reversing a significant portion of the prior day's decline, which had taken it to the 1.0685 region, a three-month low. However, this upward movement was largely fueled by the mild weakness in the US dollar. On the contrary, the potential for the Federal Reserve to continue raising interest rates could limit the substantial gains for the Euro (EUR) against the US dollar.

USD Retreats Amid Profit-Taking and Rate Hike Expectations

The broad-based US dollar has retreated from recent highs as investors take profits ahead of China's inflation data and the G20 leaders summit. This decline is driven by lower US Treasury bond yields and a steadier stock market, reducing demand for the safe-haven US dollar. However, the dollar may not fall significantly because the Federal Reserve (Fed) plans to keep raising interest rates, which supports bond yields. Strong US jobless claims and positive economic data indicate a robust US economy, reinforcing the Fed's rate hike strategy.

This suggests the EUR/USD pair could experience some upward pressure due to the weaker US dollar stemming from improved market sentiment. Still, potential rate hikes by the Federal Reserve could limit significant gains for the Euro (EUR) against the US dollar (USD).

Mixed Signals from ECB and Upcoming Data

On the flip side, European Central Bank (ECB) officials have given mixed signals regarding future interest rate increases. While Slovak policymaker Peter Kazimir supports a rate hike in September due to high inflation, ECB Governing Council member Ignazio Visco believes the ECB is nearing a point where it should stop raising rates. This uncertainty could discourage traders from making strong bullish bets on the Euro (EUR) and may limit significant gains for the EUR/USD pair, as the lack of clarity from the ECB affects market sentiment and expectations for the Euro's performance against the US dollar.

Looking forward, traders will pay attention to German CPI data and French Industrial Production figures for market direction. No significant US economic data is expected, so the US dollar's fate depends on bond yields and overall market sentiment. The EUR/USD pair is likely to continue its eight-week losing streak, with a downward trend expected due to uncertainty ahead of the important ECB meeting next week.

EUR/USD - Technical Analysis

The EUR/USD currency pair has firmly established support at the 1.0700 threshold, currently exhibiting a mild upward tendency, influenced by positive stochastic readings. There's potential for the pair to approach and test the pivotal 1.0785 resistance level before anticipated retracement.

The descending channel remains a dominant force in dictating the primary bearish trajectory, with the EMA50 consistently reinforcing this movement. The overarching bearish outlook remains intact for the foreseeable future unless the currency manages to breach and sustain above the 1.0785 mark. It's worth noting that our subsequent significant objective is pegged at 1.0635.

Today's trading range is projected between the support at 1.0635 and resistance at 1.0785.