The US Federal Reserve's reaffirmation of the possibility of raising US interest rates, despite its recent decision to keep rates unchanged at the last meeting, helped the US dollar achieve strong gains against the rest of the other major currencies, and the share of the EUR/USD currency pair was a decline to the lowest support level of 1.0833 him more than two weeks ago. This short week did not get the euro any positive momentum so far. Which may increase the bears' chances of moving the currency pair to stronger support levels. Moving towards the support level of 1.0750, the technical indicators will move according to the performance on the daily chart below, towards strong oversold levels. Overall, the EUR/USD is now trading below the 100-hour moving average. As a result, the pair appears to be approaching the oversold levels of the 14-hour RSI.
The EURUSD exchange rate is expected to trade significantly below current levels by 2023 according to new analysis by independent research firm Capital Economics. In this regard, analyst Jonas Goltermann says in his report on the mid-year currency review that“Our view is that the US dollar will strengthen against most other currencies in the coming quarters as risk appetite exacerbates amid recession in the United States, the euro area and other developed markets”.
"The US dollar is ultimately flat for the year so far, with supportive factors such as improved US economic data surprises and higher interest rates offset by unsupportive factors such as broadly improving global risk sentiment," he added Golterman.
However, sentiment will eventually deteriorate over the coming months, as recessionary pressures take hold and drive demand for the dollar's familiar safe-haven characteristics. The EUR/USD was trading as high as 1.1095 in late April and 1.1092 in early May, but that strength has waned and the pair has fallen back towards the 1.06-1.08 region in the past two weeks.
One potential area of interest for the dollar outlook lies in the ongoing AI-driven boom in a handful of US technology stocks, which Capital Economics says is increasingly looking like a bubble.
Alongside these views, Capital Economics maintains a pessimistic stance on the outlook for the Eurozone.
“We expect the euro to depreciate significantly on the back of a further deterioration in economic activity,” says Hubert de Barochez, market economist at Capital Economics.
Weaker-than-expected eurozone purchasing managers' indices in June - confirmed in final versions on July 5 - support Capital Economics' view that economic activity will disappoint and "push the euro and government bond yields lower by the end of 2023".
EUR/USD Technical Outlook
- In the near term and according to the performance of the hourly chart, it seems that the EUR/USD is trading within a bearish channel formation. This indicates a significant short-term bearish bias in market sentiment.
- Therefore, the bears will be looking to extend the current path down toward the 1.0820 level or lower to 1.0780.
- On the other hand, the bulls are targeting potential bounces around 1.0881 or higher at 1.0901.
In the long run, and according to the performance on the daily chart, it appears that the EUR/USD is trading within forming a sharp descending channel. This indicates a strong long-term bearish bias in market sentiment. Therefore, the bears will target long-term profits at around 1.0786 or below the support at 1.0692. On the other hand, the bulls - the bulls - will be looking to pounce on profits around the 1.0940 resistance or higher at the 1.1024 resistance.
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