- Annual inflation is down to 8.6% in the euro area.
- The dollar continues to rise after the FOMC minutes.
- All eyes are on US Q4 Prelim GDP.
- The formation of the Third Black Crow Candlestick in the Daily chart would strengthen the bearish pressure.
EUR/USD Fundamental Analysis
The EUR/USD is now trading at $1.0591, down 0.10% in the last 24 hours. The pair has recently entered a significant bearish trend.
According to Eurostat data, the Eurozone’s Consumer Price Index (CPI) fell 0.2% month-on-month.
In January 2023, the annual inflation rate for the euro area was 8.6%, down from 9.2% in December. The final CPI core, all items excluding food, alcohol, and tobacco, was 5.3% yoy, exceeding forecasts and increasing from the preceding month’s 5.2% yoy.
A soft annual inflation report might weigh on the Euro.
Upcoming Unemployment Claims and US Q4 Prelim GDP
Recent Fed minutes showed that almost all committee members approved the smaller rate hikes of 25bp. After the release of Fed minutes that indicated future rate rises, the US dollar held close to previous highs. The Dollar Index rose 0.02 percent to 104.60.
However, given that the meeting happened before the US released influential data, the hawkish tone in the minutes is surprising.
Today, the Q4 GDP figures and initial unemployment claims will be the focus. According to forecasts by economists, the GDP grew by 2.9% in the fourth quarter. However, an unexpected drop in unemployment claims and a higher revision to GDP figures would spark betting on a more hawkish Fed policy stance. Bostic, a member of the FOMC, will also speak today.
Therefore, coming US data and Fed speech will most likely have the ultimate call on the market sentiments and the direction of the US dollar.
EUR/USD Technical Analysis
The Daily Chart of the EUR/USD currency pair shows signs of a bearish trend continuation. The 20-Day Simple Moving Average is about to cut the 50-Day SMA from above, giving signs of selling pressure. Furthermore, if today’s candlestick also ends up red, it would make the Three Black Crow Candlestick pattern, confirming further fall ahead. The price is moving near the lower band of descending channel, which means it could also reverse from here. However, there are more chances of trend continuation than a reversal.
The Technical Indicators are also confirming the strength of bearish pressure. The Relative Strength Index (RSI), with a 36 value, suggests there is room for the price to fall further before entering the oversold region. Meanwhile, the blue signal line of the Stochastic Oscillator has already entered the oversold area, suggesting further fall ahead. Additionally, The Moving Average Convergence and Divergence (MACD) histograms below the zero line are also backing the selling pressure in the market.
The initial support is provided to the pair at 1.05751, where the lower band of the descending channel is also resting. Any break below this level would trigger a massive fall towards the next support at 1.05049. A breach below this level would drag the prices a little far at the psychological support level at 1.04306; it is where the 100-Day SMA is also standing.
On the bullish side, the pair will need to break above the 1.06556 level to start a reversal.
EUR/USD Daily Technical Levels:
Pivot Point: 1.0623