EUR/USD Technical Analysis: Increasing Downward Pressure

The bearish stability of the EUR/USD pair, around its lowest in more than twenty years, continues to dominate the performance of the most popular currency pair in the forex market. The consequences of the Russian-Ukrainian war and the energy future in the eurozone are increasing. The European Central Bank is facing constant pressure for more times the interest rate is raised.

 On the other hand, the US economy is still strong, although the US central bank is the most strict among the global central banks and has not been indifferent to the fears of recession as a result.

  • The single European currency fell briefly to below 0.9550 against the dollar in Europe at the beginning of this week's trading.
  • This is among losses that closely coincided with the sharp declines in the exchange rates of the British pound, some of which reached all-time lows in an apparent response to the increasing supply of British government debt coming to the market.

Euro Quick to Bounce Back

Sterling's losses on Monday were quickly reversed, but they previously reversed the price action seen on Friday and in another trading session also marred by risk aversion in international markets, which seemed to affect many other currencies at the time. The Euro was also quick to bounce back above 0.96 after it shrugged off the downbeat Ifo survey of German corporate sentiment and after a noticeable boost came on the back of hawkish comments from Croatian National Bank Governor Boris Vujic and others on the ECB Governing Council.

Commenting on this, Salomon Fiedler, an economist at Berenberg, says: “We expect Germany to fall into a recession that begins in the third quarter and continues throughout the winter. The results of the September IFO survey that were published fit our bleak expectations.”

There is also another ECB Lagarde appearance at the Frankfurt Forum on US-European geoeconomics on Wednesday as all European appointments punctuate a busy schedule of Federal Reserve policy makers making public appearances for the first time since last week's decision. Lee Hardman, currency analyst at MUFG, commented, “The move lower over the past week was primarily driven by the stronger US dollar rib after the Fed's hawkish policy update sent a strong signal that more significant gains will be needed during the remainder. From this year,” and “Eurozone CPI reports are expected to reveal that inflation has not yet peaked in the region, while the US personal consumption expenditures deflator should provide further encouragement because peak inflation has already passed.”

It is not clear if anything in the European calendar will be enough to halt the upside in the US dollar, which rose strongly against many currencies after last week's US interest rate decision, although Friday's release of the latest core PCE price index will be closely monitored by the market. This is the Fed's preferred measure of inflation and is set to be followed by the appearance of at least three FOMC members including Vice Chairman Lyle Brainard, while the dollar may be sensitive to any optimistic views on the outlook for inflation on their part.

For its part, the Fed raised the upper end of the federal funds rate range to 3.25% last week and warned of the possibility of further large increases, with the index expected to rise above 4.5% sometime next year as part of the bank's efforts to ensure that inflation returns US to target 2%.

EURUSD analysis today:

  • The bearish trend of the EUR/USD currency pair will remain strong and continuous in the upcoming trading sessions.
  • This is unless the euro gets strength factors represented by a breakthrough in the European energy crisis along with signs of tightening from the European Central Bank or weak investor appetite towards the excessive strength of the US dollar .
  • According to the general trend of the euro dollar, the bearish support levels will be 0.9530, 0.9480 and 0.9400, respectively.

All technical indicators are towards strong oversold levels, and according to the performance on the daily chart, breaking the resistance 0.9880 will be important for a first exit from the current descending channel. Today there will be statements by both the governor of the European Central Bank and the governor of the US Federal Reserve.

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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