EUR/USD Forecast: Encouraging US data refreshes US Dollar demand
Aa
Share
- The German Harmonized Index of Consumer Prices rose 4.6% YoY in September.
- The United States confirmed Q2 Gross Domestic Product at 2.1% QoQ.
- EUR/USD holds above 1.0500 but lacks bullish strength.
The EUR/USD pair recovered some ground on Thursday after bottoming at 1.0487 on Wednesday, its lowest since December 2022. Financial markets are still trading on sentiment, with concerns piling up.
On the one hand, increased price pressures forced central banks to maintain their hawkish perspective in their September meetings and delay the chances of rate cuts. On the other, resurgent oil prices hint at continued inflationary pressures throughout September, bolstering the odds for a global economic setback.
The dismal mood receded somehow, helping the Euro recover ground, yet optimism is nowhere to be found. The Joint Economic Forecasts prepared by five different economic institutes predict the German Gross Domestic Product (GDP) will contract by 0.6% this year and grow by 1.3% in 2024. Meanwhile, inflation is expected to be 6.1% in 2023 and ease to 2.6% in 2024.
Ahead of Wall Street’s opening, Germany released the preliminary estimate of the September Harmonized Index of Consumer Prices (HICP), up 0.2% MoM and 4.6% YoY, below the market expectations. The Spaniard HICP printed at 3.2% YoY, below the 3.3% expected, although higher than the previous 2.4%. Finally, the Euro Zone published the September Economic Sentiment Indicator, which beat expectations by printing 93.3.
The United States (US) came out with some encouraging news, as the Q2 GDP was confirmed at 2.1%, while Initial Jobless Claims for the week ended September 22 came in at 204K, better than the 215K anticipated.
EUR/USD short-term technical outlook
The EUR/USD pair extended its recovery by a few pips following US figures but quickly retreated from an intraday high of 1.0556. In the daily chart, the advance seems corrective, as the pair keeps developing below all its moving averages, with the 20 SMA heading sharply lower at around 1.0670. Technical indicators, in the meantime, bounced from their recent lows but lack upward strength. Notably, the Relative Strength Index (RSI) indicator remains within oversold readings, falling short of confirming a bottom.
The 4-hour chart shows EUR/USD is retreating from near a bearish 20 SMA, providing dynamic resistance at around 1.0560. At the same time, the Momentum indicator has turned flat well below its 100 level, while the RSI indicator heads higher at around 34, correcting extreme oversold conditions. Overall, the bullish potential seems well limited, while chances of lower lows increased after failure to extend the advance beyond the mentioned 20 SMA.
Support levels: 1.0484 1.0440 1.0395
Resistance levels: 1.0560 1.0610 1.0660
