EUR/USD Forum: Downward Pressure Amid ECB Caution

EUR/USD Forum: Downward Pressure Amid ECB Caution

Recent developments, including cautionary signals from the European Central Bank (ECB) and a strengthening US Dollar Index, contribute to increased selling pressure on the euro in the EUR/USD forum.

EUR Base Rate Intraday Bias Points Downward

In the short term, the intraday bias for EUR/USD remains on the downside, with a current fall from 1.1138 in progress towards the 1.0722 support level. Analysts suggest that a sustained break below this support could indicate the completion of the entire rise from 1.0447, setting a target at this lower level. However, the risk remains tilted to the downside as long as the resistance at 1.0995 holds in case of a potential recovery.

Bigger Picture: Corrective Pattern and Potential Third Leg

Zooming out to the bigger picture, price actions from 1.1274 are interpreted as a corrective pattern in response to the rise from 0.9534 (2022 low). The ongoing rise from 1.0447 is seen as the second leg of this pattern. While a further rally is plausible, analysts anticipate a limitation of the upside by the 1.1274 level, indicating the potential initiation of the pattern’s third leg. Conversely, a sustained break of the 1.0722 support would suggest that the third leg is already in progress, targeting 1.0447 and potentially even lower levels.

Market Reactions to ECB Caution and US Economic Signals

The US Dollar Index (DXY) has shown resilience, currently standing at approximately 103.27 with a 0.12% increase. This follows the Euro and British Pound’s decline against the US Dollar on January 16, further fueled by a series of economic indicators.

In the UK, the Consumer Price Index (CPI) year-on-year surpassed expectations at 4.0%, accompanied by a Core CPI increase of 5.1%. However, the Producer Price Index (PPI) Input and Output both decreased, suggesting mixed inflation and manufacturing costs.

Upcoming Events Impacting Currency Markets

Investors are keeping a close eye on upcoming events that could influence currency markets. ECB President Lagarde’s speech, the German bond auction, and US economic data releases, including retail sales and industrial production, are the focal points. The US Dollar Index is ascending, currently positioned at 103.060, indicating potential further gains.

Technical Analysis of EUR/USD and GBP Swap Rates

The EUR/USD pair is currently trading at 1.08616, marking a 0.16% decrease from the previous close. Immediate resistance is identified at $1.0924, with further barriers at $1.0956 and the psychological $1.1000 level. Support levels are observed at $1.0838, $1.0792, and $1.0742. The 50-day and 200-day Exponential Moving Averages (EMA) act as resistance above the current price, suggesting potential downward pressure.

The Pound to Dollar rate experienced a 0.50% bounce following stronger-than-expected UK CPI data. On a 4-hour chart, the pivot point stands at $1.2645, with resistance observed at $1.2673, $1.2722, and $1.2783. Support levels appear at $1.2608, $1.2571, and $1.2511. The EMAs may provide support to downward moves, with a symmetrical triangle pattern breach at $1.2673 indicating potential selling pressure.

EUR/USD Signal: More Downside as Global Risks Rise

Economists are closely watching core CPI expectations, anticipating a lower figure than November’s 3.6%. A higher-than-expected inflation reading could signal a more restrictive ECB stance.

Bearish View:

  • Sell the EUR/USD pair.
  • Take-profit at 1.0800.
  • Stop-loss at 1.0950.
  • Timeline: 1-2 days.

Bullish View:

  • Set a buy-stop at 1.0900.
  • Take-profit at 1.100.
  • Stop-loss at 1.0800.

The selling momentum in the EUR/USD forum persists in anticipation of upcoming European inflation and US retail sales figures. Presently, the trading value has dipped to 1.0870, marking its lowest point since December 13th. As the US dollar strengthens, the currency pair confronts difficulties, with forthcoming economic data set to influence its future direction significantly.