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During the European session on Wednesday, the EUR/USD Down And experiencing a decline below the 1.0800 level, influenced by a resurgence in the US Dollar. Market participants are exercising caution due to an active economic agenda in both the European Union (EU) and the United States (US), with the US ADP being particularly regarded as a significant event risk.
Support for the EUR/USD identified at the 100-day Simple Moving Average (SMA) at 1.0775. The integrity of this level is currently under scrutiny, and a daily closure significantly below it would indicate a predisposition towards further weakness. Notably, the price has already descended below the 20 and 200-day SMAs. And with technical indicators in the daily chart consistently favoring a downward trajectory. A breach below 1.0770 would expose the next crucial support at 1.0690, marked by the uptrend line and the 55-day SMA.
Highlights:
1- EUR/USD Drops: The EUR/USD Down and falls below 1.0800 as the US Dollar strengthens, with market caution ahead of busy EU and US economic events
2- Support Levels Tested: Support at 1.0775 tested, and a daily close below may signal further weakness. The pair is below key SMAs, and the next support is at 1.0690 if 1.0770 breached.
3- Bearish Momentum Persists: In the 4-hour chart, a bearish bias prevails with oversold conditions. Short-term negative momentum persists below 1.0850, anticipating a potential consolidation before further decline.
4- Central Banks and Data Impact: ECB’s Schnabel notes faster inflation decline, suggesting an unlikely rate hike. Market expects a rate cut by March. Eurozone data and USD strength, despite mixed US data, influence sentiment. Fed’s perceived tightening completion and anticipation of 2024 rate cuts prevail. ADP Employment Report awaited.
EUR/USD Down: 4-Hour Analysis: Bearish Bias Persists Amidst Downturn and USD Resilience”
Analyzing the 4-hour chart, a bearish bias is evident in the EUR/USD pair. Technical indicators indicate oversold conditions, implying a potential consolidation phase before a probable further decline. Sustained negative momentum in the short term anticipated as long as the pair remains below 1.0850. Reversing the negative short bias would necessitate a sustained rise and maintenance above 1.0915.
The recent downturn in the EUR/USD, extending the correction from levels above 1.1000, has resulted in consolidation beneath the 20-day Simple Moving Average (SMA). This movement attributed to the strengthened US Dollar, which demonstrated resilience despite mixed US data and decreased Treasury yields.
ECB’s Schnabel Signals Unlikely Rate Hike Amidst Accelerating Inflation Decline
In a Wednesday statement, European Central Bank (ECB) representative Isabel Schnabel acknowledged a more rapid decline in inflation than anticipated, signaling an improbable near-term rate hike. Market consensus aligns with this perspective, anticipating a potential rate cut by the upcoming March meeting. Eurozone data for October revealed a 9.4% decline in the Producer Price Index (PPI) compared to the previous year. A decrease from the 12.4% recorded in September.
Also Read: Gold Prices Faces Strong Retreat from Historic Peaks
The final release of Eurozone (EZ) November Service Purchasing Managers’ Index (PMI) displayed an upward revision. A report from the ECB indicated that one-year inflation expectations remained stable at 4.0%. Thursday will witness the release of Eurozone retail sales data for October.
USD Strength Endures Amidst Favorable Economic Indicators and Fed’s Perceived Policy Shift
The USD’s strength, leading to EUR/USD Down, persisted despite larger-than-expected reductions in the JOLTs Job Openings, indicating a more balanced labor market. The ISM Services PMI exceeded expectations, rising to 52.7 in November. With inflation decelerating and a less stringent labor market, the Federal Reserve (Fed) is perceived to have concluded its tightening cycle. Although not currently suggested by Fed officials, market participants anticipate rate cuts in 2024. The ADP Employment Report is scheduled for release on Wednesday.
