Is EUR/USD ready to touch 1.07?

20 באוק׳ 2023

The relationship between the Euro (EUR) and the US Dollar (USD) is maintaining a tight range below 1.0600 towards the end of the week. The lack of significant data releases is contributing to the cautious market attitude, which is supporting the strength of the US Dollar. This situation makes it challenging for the EUR/USD relationship to gain momentum. Over the last four days, EUR/USD has recorded its third increase and is currently trading above the 20-day simple moving average. On the daily chart, technical indicators suggest a bullish sentiment, with the RSI rising and Momentum exceeding the 100 level. If the relationship manages to close above 1.0640 in a day, it could set the stage for further gains. Conversely, a drop below 1.0500 could suggest more weakness ahead.

Looking at the 4-hour chart, the relationship shows a bullish trend, with technical indicators confirming this perspective. As long as the relationship remains above 1.0555, we can anticipate further gains. However, a decline below this level could indicate support at 1.0530, suggesting the end of the current bullish movement.

The main resistance level is at 1.0630, serving as a horizontal barrier and a descending trendline. Currently, this area is limiting the extent of gains. If the relationship manages to consolidate above this level, it could pave the way for further increases, with an initial target at 1.0675.

On Thursday, despite risk aversion in the markets fueled by a drop in the US Dollar, EUR/USD recorded an increase and was on the verge of closing at daily highs not seen in over a week. However, it struggled to stay above 1.0600, suggesting obstacles in the path to further gains.

On Friday, Germany will release the Producer Price Index (PPI) for September, with expectations of an annual rate decline from -12.6% to -14.2%. The next significant event will be the European Central Bank (ECB) meeting in the following week, with expectations of key rates remaining unchanged for the first time since June of the previous year.

US economic data released on Thursday were mixed, with initial jobless claims declining but continuing claims increasing. Existing home sales dropped to the lowest level in 13 years, and the Philly Fed Manufacturing Index recorded a negative value in October. These data did not favor the US Dollar. No major reports are expected for Friday.

Federal Reserve Chairman Jerome Powell expressed a preference for keeping rates unchanged in the short term and emphasized the persistent inflation risk. This message aligns with recent Fed statements indicating the intention to keep rates stable as long as inflation slows and the economy does not show signs of further strengthening.

The price is in a consolidation within a support and resistance zone. From this point, the price could either move upwards towards the supply zone at the level of 1.0630 or drop and bounce within the significant demand zone at the level of 1.0540 before continuing towards 1.07. Let me know what you think, regards from Nicola, the CEO of Forex48 Trading Academy.