- Geopolitical tensions in the Middle East region are still negatively affecting the performance of the price of the EUR/USD currency pair, which is confirmed by the weakness of the upward rebound of the currency pair since the start of the crisis.
- Also, for two days in a row, the currency pair fails to exceed the resistance level of 1.0594 and stabilizes around the level of 1.0533 at the time of writing.
- The analysis is the closest point to the psychological support 1.0500, which confirms the extent of the bears’ control and readiness to test stronger support levels.
What is expected for the EUR/USD in the coming days?
ING believes that the peak of pessimism for the EUR/USD has ended. Therefore, EUR/USD exchange rate could benefit from a return in investor appetite amid 2 signs. Firstly, the worst of the euro zone's economic downturn may have passed. Secondly, and that China's growth prospects are improving. Meanwhile, the peak of pessimism about the Eurozone could come alongside a peak of optimism about the US economy's ability to outperform, adding another source of potential support for the EUR/USD pair. In this regard, Francesco Pisol, Forex analyst at ING Bank, says: “We are seeing some tentative return to Euro longs in the market, despite continuing evidence of strong US activity.”
Alongside, a potential turning point in the Eurozone data pulse comes thanks to better-than-expected business confidence numbers from Germany. Whereas the ZEW survey index beat expectations with a reading of -1.1, a big win on the -9.3 reading that was expected and a rebound in September of -11.4. For his part, ZEW said: “The assessment of the economic situation in Germany has stabilized.”
Obviously, these numbers may have implicitly mentioned that we have already reached peak pessimism in the eurozone, which is like what we observe with Chinese sentiment. Conversely, markets may start to think that optimism about the US growth story is also nearing a peak. “We expect a return to EUR/USD,” the analyst added.
The euro/dollar exchange rate had fallen by about 6.0% since its highest levels in July, but stabilized above 1.05 during the month of October. The question for forex watchers is whether this stability represents a pause in the trend or a base. Accordingly, the analyst added, “We still consider a sustained rise in the EUR/USD pair to be premature, given the strong (and growing) price advantage of the US dollar.” “Improvements in Eurozone growth should help, but weakness in US data remains key to opening up significant upside for the pair.”
From one level, the stability of the euro comes alongside expectations that China has also seen negative expectations forming a base, which supports the euro due to the strong trade relations between the two economies. The analyst also added: “With the help of today's Chinese data, we could see some support above 1.0600 today. The volatile situation in the Middle East remains a big question mark over the pair’s direction in the short term.”
On another level. China said on Wednesday that the gross domestic product of the world's second-largest economy grew 4.9% in the year through the third quarter, beating estimates of 4.4%. This represents a slowdown of 6.3% in the second quarter, but as always, when it comes to currencies, this is how the incoming data matches expectations. China's industrial production expanded 4.5% in the year through September, which was better than the expected 4.3% and in line with the previous month's release.
EUR/USD outlook today
Yesterday's decline pushed EUR/USD below the 100-hour moving average line. As a result, the pair appears to be moving near the oversold levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the EUR/USD is trading within a descending channel formation. It also appears that the MACD on the hourly chart has recently completed a bearish cross, indicating a bearish bias. Therefore, the bears will look to extend the current series of declines towards 1.0517 or lower to the 1.0500 support. On the other hand, the bulls will target potential bounces at around 1.0565 or higher at 1.0590.
In the long term, and according to the performance on the daily chart, it also appears that the EUR/USD is trading within a downward channel. However, the daily MACD appears to have recently completed a bullish crossover amid deteriorating momentum. Therefore, the bulls - the bulls - will target potential bounces at around 1.0600 or higher at the 1.0678 resistance. On the other hand, the bears will target more long-term profits at around 1.0459 or lower at the 1.0380 support.
Shortly, The EURO/Dollar will be affected today by the announcement of US data, the number of weekly jobless claims, the reading of the Philadelphia industrial index, and then most importantly, new statements from US Central Bank Governor Jerome Powell.
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