EUR/USD – Will it Retreat after Breaking Out of the Consolidation?

EUR/USD Fundamental Analysis

The EUR/USD pair is moving in the range of 1.0761 and 1.0724. US Vice President Joe Biden made some hawkish statements during his State of the Union (SOTU) speech, and now traders have to decide how to respond to them. Apart from the declining US Treasury bond rates, the Federal Reserve (Fed) and European Central Bank (ECB) leaders’ mixed remarks also impacted the pair.

Additionally, President Biden said that the US is in its best condition in decades to compete with China or any other nation. However, China’s refusal to allow US Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe to speak on the phone is increasing geopolitical tensions and driving up the price of the US dollar.

Neel Kashkari, president of the Minneapolis Fed, suggested on February 7 that the Fed may need to continue higher interest rates for a prolonged period. On the other hand, Fed Chairman Jerome Powell stated that he anticipates 2023 to see a considerable drop in inflation. Francois Villeroy de Galhau, an official of the ECB, claimed that the Eurozone is quickly approaching its peak inflation rate.

Any possible risk events on a light calendar might provide the pair with new impulses. Therefore, EUR/USD traders must keep an eye on such possibilities.

Italian Retail Sales m/m

According to data released on February 8, Italian retail sales decreased by 0.2% in December compared to an expected 0.8% decline in the preceding month. Moreover, December saw a 0.7% volume decline in retail sales. In November, retail sales increased by 0.8%.

The decline in retail sales by value and volume in Italy occurred despite a pick-up in wage growth and stable labour market conditions. However, easing recessionary worries will probably encourage an increase in spending consistent with the ECB’s more optimistic outlook.

Additionally, the EUR/USD dropped to an early low before rebounding to a pre-stat high ahead of the retail sales numbers. However, the EUR/USD soared to a post-stat high regarding the retail sales numbers before dropping.

Upcoming FOMC Member Williams Speech

Today in the coming American trading session, Nick Timiraos, at the Wall Street Journal’s CFO Network Summit in New York, will interview President John Williams of the Federal Reserve Bank of New York. Williams will give a speech in a few hours, and participants in the market are awaiting his speech to get a better idea before taking any position in the market.

EUR/USD Technical Analysis

EUR/USD technical analysis

The Technical outlook of the H2 chart of EUR/USD indicates that there might be a bullish movement coming ahead. Price is also moving above the 20-Day Simple Moving Average line (light blue). The next two candles are expected to be bullish.

The immediate resistance stands at the 1.07611 level. It is also the same level where the lower part of descending channel touches the current price level. Furthermore, the descending trend line (orange) is also touching the price at the same level. Therefore, it is a crucial level to watch. Any break above this 1.07611 level will push forward the prices towards R2 at the 1.08390 level. 

On the other hand, the 1.06801 level is acting as the crucial support level for the currency pair EUR/USD. There are more chances of retreating towards the 1.08390 level than remaining in consolidation. However, the 20-Day SMA is also holding the pair. If the price breaks below this level, it could further move the downside towards the support level.

Daily Technical Levels:


Pivot Point: 1.0719

More is lost by indecision than wrong decision.

Marcus Tullius Cicero