EUR/USD Technical Analysis: Testing its Six-month Low

Although the American Federal Reserve kept the interest rates unchanged as expected, the price of the euro currency pair against the US dollar EUR/USD was exposed to stronger selling operations with losses extended to the 1.0616 support level. This is the lowest it has been in six months. It stabilized near those losses when writing the analysis. The currency pair's losses increased after the Federal Reserve left the US interest rate unchanged on Wednesday for the second time in its past three meetings, signaling that it is easing its fight against inflation as price pressures ease.

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At the same time, policymakers at the Federal Reserve Bank also indicated that they expect to raise interest rates again this year and envision the key interest rate to remain higher in 2024 than most analysts expected. But as their final policy meeting wrapped up, the 19 members of the Federal Reserve's interest rate-setting committee expressed growing optimism that they would be able to slow inflation to their 2 percent target without triggering the deep recession that many economists had feared. It is a hopeful scenario that economists call the "soft landing".

In a set of new quarterly forecasts, policymakers showed they expect faster economic growth and lower unemployment rates this year and next than they expected just three months ago. Even with strong growth on the horizon, they also believe inflation will continue to slow. Since reaching its highest level on an annual basis at 9.1% in June 2022, consumer inflation in the United States of America has decreased to 3.7%. Speaking at a press conference yesterday, Federal Reserve Chairman Jerome Powell warned that the US central bank still wants more assurances from the upcoming economic data that inflation is on a sustainable path to return to its target level. But he pointed out that the Fed is nearing the end of its interest rate hike cycle and that the soft landing looks "reasonable".

Expectations of the euro against the dollar today:

  • According to the performance on the daily chart below, the general trend of the EUR/USD bearish currency pair will become stronger.
  • There may be an opportunity to move towards the main support on that time period 1.0520 if the strength of the US dollar continues from the results of the upcoming US economic data.
  • This confirms that the US economy It remains strong under the tight policy of the US Federal Reserve Bank.
  • It must be taken into consideration that with the recent moves the technical indicators have moved towards strong sell saturation levels.

On the other hand, and in the same period of time, there will not be a first reversal of the downward trend without the movement of the euro against the dollar towards the resistance levels 1.0775 and 1.0840 respectively. The euro dollar will react today with the announcement of the results of the American economic data led by the number of weekly jobless claims and the reading of the Philadelphia Industrial Index along with the reading of consumer confidence for the Eurozone.

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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.