EUR/USD Analysis: Bear Control Continues

Persistent bearish trend with key support at 1.0723. Awaiting US CPI data, potential shift towards 1.09 resistance if inflation underwhelms, while central bank policies continue to influence market dynamics.

  • The EUR/USD exchange rate has been under pressure in 2024 trading but is unlikely to fall below 1.0723 during this week unless we receive a strong report on US inflation.
  • In general, the US dollar has been strong this year, and the markets seem happy to shed some of the recent strength; In fact, EUR/USD rose for four consecutive days last week in a price action that indicates a stressful uptrend for the US dollar in the short term. 

EUR/USD Analysis Today - 13/02: Bear Control Continues (Graph)

We now note that support for EURUSD comes in at the December low of 1.0723, which is not far from current levels of around 1.0780. To be sure, the broader picture continues to be one of outperformance for the US dollar and therefore any strength in the EUR/USD will remain limited to a multi-day time frame. Given the significant resistance to expectations of a US Fed rate cut that we have seen so far in 2024, we expect another potential decline in the EUR/USD rate over the coming weeks. 

Will the Price of the Euro Rise in the Coming Days? 

In this regard, Fouad Razaqzadeh, market analyst at City Index, says: “Currently, the EUR/USD pair has found support at its lowest level in December at 1.0723, although there is still a good possibility that it will break below this level soon.” “Under the current conditions, I would only consider bullish trades on EUR/USD if we see a clear bullish reversal pattern emerge first, or if there is a potential breakout above the recent high, near the 1.09 resistance, to negate the prevailing bearish trend in the pair,” he added. EUR/USD. 

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In general, the US data surprises according to the results of the economic calendar were very strong during recent weeks, and we will need to see this pattern repeated in the coming days to maintain the continued positive momentum of the US dollar. We wonder whether we have reached “peak surprise” regarding the US economy and the dollar; That is, expectations are already so high that the currency will have a greater reaction to any disappointments caused by lower data. It may be that we need more attractive releases to keep the US dollar's momentum going. 

This week, the release of the US CPI on Tuesday will be important: expect a further rise in the US dollar price, pushing the EURUSD exchange rate lower to the medium-term support level at 1.0723 (tested last week) if we get a report contrary to the consensus. The market expected a reading of 0.2% on a monthly basis, with the figure expected to reach 3.0% on an annual basis. 

If US inflation numbers come in below expectations, we are looking forward to a strong recovery in the EUR/USD towards the 1.09 resistance level. Also keep an eye on US retail sales on Thursday, as an expected 0.1% month-on-month improvement could indicate that US consumers remain unfazed by the Fed's rate hikes, which could signal upside risks to inflation. 

In contrast. There are two important data points in the euro zone this week, starting with Germany's February ZEW survey, as investors will get another gauge of how the region's largest economy is performing. The economic sentiment number is expected to be 17.5, and the current situation is -79. Watch the Eurozone GDP growth rate on Wednesday at 10:00 a.m. to get a sense of how much pressure the economy was under in December and the last quarter of the year. The monthly reading is expected to reach -0.3% for December and 0% on a quarterly basis for the last quarter. 

We note that sentiment towards the Eurozone is already very poor, and the Euro will likely shrug off another set of disappointments. This leads us to expect the euro price to be more responsive to any better-than-expected results, which could push EURUSD slightly higher. 

EUR/USD Plan Today: 

The price of the EURUSD currency pair formed limited peaks and lower levels connected to a visible downward channel on the hourly chart, and it appears that there is another test of resistance. The price is already testing the 38.2% Fibonacci level at 1.0792, but it may still be on its way to a larger decline to the 50% Fibonacci level at 1.0813 or the 61.8% Fibonacci level that is closest to the top of the channel and the dynamic inflection point of the 100 simple moving average. So far the 100 SMA is below the 200 SMA to confirm that a downward shift is continuing or that a sell-off is likely to gain momentum rather than reverse. In this case, EURUSD could return its sights to the swing low at 1.0727 or the bottom of the channel closer to the key psychological mark at 1.0700 support

The 100 SMA is below the 200 SMA to confirm that the path of least resistance is downtrend or that resistance is more likely to hold than break. The Stochastic indicator is also in the overbought zone to reflect exhaustion among buyers, so a shift lower would mean the return of selling pressure. At the same time, the RSI has a little more room to rise before it reverses overbought levels, so buying momentum may remain in place until that happens. A break above the 100 SMA may still find sellers at the 200 SMA near the swing high and the key psychological mark at 1.0900. 

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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.