- For two days in a row, the price of the EUR/USD currency pair tried to rebound to the upside after strong selling operations that pushed it towards the support level 1.0536.
- This is the lowest level for the currency pair for nearly two months.
- The attempts to bounce up are still weak, as it did not exceed the level of 1.0645, and settles around the level of 1.0590 at the time of writing.
- The US dollar is still the strongest with expectations of a US interest rate hike, after the strong positive numbers of the US economy recently, which confirm that the economy is still far from recession despite the US rate hike eight times in a row.
In general, EUR/USD can take cues from the CPI readings for the Eurozone due later in the week, as well as the US ISM manufacturing and services PMIs. A slight decline in inflationary pressures is expected in the Eurozone, but stronger than expected results may confirm the optimistic leaning of most ECB officials. The headline figure is expected to decline from 8.6% to 8.3% y/y for the month of February.
Meanwhile, bullish surprises in US PMI readings may keep investors optimistic that the US Federal Reserve will continue its tightening cycle for a while longer.
In particular, the payrolls components of the PMI surveys may attract increased market interest, as traders anticipate next week's US non-farm payrolls release. Remember, the US economy surprised with a very strong jobs number for January, so other upbeat results for February may confirm that more rate hikes are imminent.
The dollar's recovery is tipped by a number of analysts to extend through most of the first half of 2023, suggesting that the euro won't be able to snowboard for some time yet.
The crucial question for those looking to make currency payments is where the bottom might be for the EUR/USD exchange rate. The dollar's strength is underpinned by expectations of more Fed rate hikes than previously anticipated due to stronger-than-expected data, meanwhile the pro-euro story is now well understood by the markets and therefore "in price".
Commenting on this, Derek Halpiny, FX Analyst at MUFG, said: "The repricing of the higher interest rate and the dampening of expectations of rate cuts later this year has breathed new life into last year's strong US dollar trading."
Technical analysis of the currency pair:
The price of the EUR/USD currency pair is heading lower within a descending channel on its hourly time frame, and the resistance seems to be holding again. The pair can set its sights on the downside targets set by the Fibonacci extension tool afterwards. The 100 SMA is below the 200 SMA to confirm that the general trend is still bearish, and selling is more likely to gain momentum than to reverse. The moving averages are also near the top of the channel adding to its strength as resistance.
Stochastic is heading down from the overbought area to confirm bears' control while buyers take a break. The oscillator has plenty of room to slide before reaching the oversold zone to reflect exhaustion among the sellers. Similarly, the RSI is moving lower to show that bearish pressure is at play, so EUR/USD may continue to follow until oversold conditions are met.
