The EUR/USD pair is likely to continue to fall
- Speakers from the central banks of Europe and the United States repeated their bellicose rhetoric.
- Germany is to publish its harmonized consumer price index for January on Thursday.
- The EUR/USD pair is under slight pressure and may continue to fall.
The EUR/USD pair traded in a tight range on Wednesday, ending the session with slight losses in the 1.0720 price zone. The market enthusiasm, fueled by US Federal Reserve Chairman Jerome Powell, was short-lived as Wall Street opened soft and then continued its decline, cutting Tuesday’s gains in half.
Representatives of the European Central Bank (ECB) were in touch, repeating their hawkish rhetoric. ECB policy chief Klaas Knot said headline inflation appears to have peaked, but added that maintaining current growth rates until May may well be necessary if core inflation does not ease significantly.
On the other hand, Fed Governor Lisa Cook said the central bank remains focused on restoring price stability as inflation is still too high. She added that they would need tight monetary policy for a while. In addition, New York Federal Reserve Chairman John Williams said the labor market is still very strong and noted that he still has some work to do on rates, the addition of data will determine the trajectory of rate hikes. Finally, Fed chief Christopher Waller warned that interest rates could rise higher than expected.
From an economic point of view, there were no relevant figures to consider. The United States posted MBA mortgage applications for the week ending Feb. 3, which rose 7.4%. On the other hand, Thursday will be a bit more interesting as Germany is finally releasing a delayed preliminary estimate of its harmonized consumer price index (HICP) for January.
Inflation will rise by 10% year-on-year from the previous 9.6% but below the current inflation cycle peak of 11.6% reached in October 2022. The higher numbers can be seen as support for the European Central Bank’s hawkish stance. (ECB), pushing the EUR/USD pair up.
In addition, the Eurozone is to publish economic growth forecasts from the European Commission, and the United States is to publish weekly unemployment data.
Short term technical outlook
EUR/USD spent most of Wednesday hovering in the 1.0730/60 price zone and is currently hovering around 1.0730. The daily chart shows the pair moving below the horizontal 20 SMA, encountering sellers trying to break above Fibonacci resistance, 61.8% retracement of 2022 downfall at 1.0745. Moreover, technical indicators remain at negative levels, although without directional strength. Finally, the 100 SMA crosses the 200 SMA around 1.0320, limiting some downside potential.
The technical readings on the 4-hour chart are in danger of shifting to the downside. The pair is developing below all of its moving averages, with the SMA-20 moving average crossing the SMA-200 moving average and currently converging with the aforementioned resistance level.
Technical indicators, meanwhile, remain in negative territory, with momentum slightly above its midline, while the RSI is slightly lower at 40.
Support levels: 1.0700 1.0660 1.0615
Resistance levels: 1.0745 1.0790 1.0840
Valeria Bednarik, FXStreet
Valeria Bednarik has extensive experience writing technical and fundamental analysis, with a particular focus on currencies and commodities. His short but precise articles cover various aspects of the market with a didactic approach adapted to the level of knowledge of any reader. She graduated from the Catholic University of El Salvador, Argentina with a Chartered Accountant degree in Taxation and Cost Management.
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