EUR/USD Consolidates Around 1.0640

23. Sept. 2023

EUR/USD wrapped up the week at approximately 1.0640, a bit below the previous week's level. The exchange rate hit a Friday low of 1.0614, marking the lowest intraday point since March, mainly due to the late dip in the US dollar linked to falling Treasury yields.

In terms of technical analysis, EUR/USD is currently navigating within a descending regression channel. The Relative Strength Index (RSI) on the 4-hour chart is below the 50 level, indicating a bearish sentiment in the short term. Key resistance levels include 1.0670 (20-period Simple Moving Average, marking the upper limit of the descending channel) and 1.0690-1.0700 (50-period SMA, a psychological level). A close above the latter on the 4-hour chart could draw technical buyers, potentially propelling the pair towards 1.0720 (100-period SMA) and 1.0760 (a static level).

On the downside, immediate support levels are identified at 1.0630 (a static level marking the mid-point of the descending channel), followed by 1.0600 (a psychological level) and 1.0580 (the lower limit of the descending channel).

EUR/USD's closing on Thursday remained almost unchanged and just below 1.0700, while Friday morning saw the pair entering a consolidation phase around 1.0650.

Data from Germany and the Eurozone indicated a slight contraction in private sector economic activity in early August compared to July. Specifically, HCOB Composite PMI in Germany rose to 46.2, and in the Eurozone to 47.1. Despite these figures not significantly boosting the euro, they contributed to maintaining its stability.

In response to the PMI survey results, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank (HCOB), stated that companies continue to display resilience and optimism in the face of weaker demand. The expectation is for the Eurozone to contract in the third quarter, with the nowcast indicating a 0.4% drop compared to the second quarter, considering the PMI indices.

In the upcoming week, S&P Global will release PMI data for the manufacturing and services sectors in the US. If the Services PMI unexpectedly falls below 50, the US dollar could face challenges in finding demand before the weekend.

Market participants will be closely monitoring risk perception. Following a significant two-day decline, major indices on Wall Street appear positioned to open in positive territory on Friday. US stock index futures are showing a rise between 0.1% and 0.3%. If risk flows dominate the financial markets during the American session, EUR/USD might experience an extension in its upward movement.

My outlook remains bullish, and for the week ahead, I plan to look for a long entry point on M15 at the opening of the New York session on Monday. I'll be patient for a structural change on M15 before searching for a favorable entry point. Feel free to share your thoughts, comment, and show your support by leaving a like. Warm regards from Nicola, the CEO of Forex48 Trading Academy.