EUR/USD Forecast: Hawkish ECB commentary not enough to lift euro

(Eren Sengezer – FXStreet)

– EUR/USD stays within a touching distance of multi-decade low touched earlier.

– Hawkish ECB commentary failed to trigger a steady recovery in the shared currency.

– Near-term technical outlook shows that the pair is still oversold.

EUR/USD has managed to erase a small portion of its losses after having touched its lowest level in over two decades at 0.9535. Despite hawkish comments from European Central Bank (ECB) officials, the shared currency is struggling to stay resilient against the dollar, allowing sellers to continue to dominate the pair’s action.

While speaking at the Frankfurt Forum earlier in the day, ECB President Christine Lagarde reiterated that they will continue to hike interest rates in the next several meetings. Previewing the October policy meeting, ECB policymaker Peter Kazimir argued that 75 basis points (bps) hikes in rates would be a “very good candidate” to keep the pace of tightening. Similarly, ECB Governing Council member Olli Rehn said that the bank needs another significant rate hike at its next meeting.

Later in the day, ECB policymaker Robert Holzmann and Executive Board member Frank Elderson will also be speaking.

Meanwhile, the Euro Stoxx 600 Index is down more than 1% in the early European session on Wednesday and US stock index futures are losing between 0.6% and 1.2%, pointing to a risk-averse market environment.

Unless the mood improves in the second half of the day, further hawkish comments from ECB officials are unlikely to trigger a noticeable euro recovery when considering the market reaction so far.

Later in the day, the US economic docket will feature August Goods Trade Balance and Pending Home Sales data. FOMC Chairman Jerome Powell will deliver welcoming remarks at the 2022 Community Banking Research Conference hosted by the Federal Reserve Bank of St. Louis. Nevertheless, the risk perception should continue to drive the pair’s action in the American trading hours.

EUR/USD Technical Analysis

EUR/USD was last seen trading within a touching distance of the static level that seems to have formed at 0.9950. Earlier in the day, the pair fell below that level but it is yet to make a four-hour close there. In case 0.9950 is confirmed as resistance, the pair could extend its slide toward 0.9900 (psychological level) and 0.9850 (static level).

On the upside, the descending trend line coming from September 20 aligns as resistance at 0.9600. Above that level, 0.9630 (20-period SMA on the four-hour chart) and 0.9670 (Fibonacci 23.6% retracement) could be seen as next hurdles.

EUR/USD outlook: Bears are likely to travel further as conditions continue to worsen

(Slobodan Drvenica – Windsor Brokers)

The Euro hit new marginally lower 20-year low in early Wednesday, as risk assets fell in Asia, lifting the dollar to new high.

Technical studies show indicators on daily chart in full bearish setup, with oversold conditions likely to slow bears for consolidative/corrective actions, before accelerating towards targets at 0.9301 /0.9000 (June 2002 low/psychological).

Falling 5DMA offers initial resistance at 0.9655, ahead of more significant Fibo barrier at 0.9691 (23.6% of 1.0197/0.9535), violation of which would signal correction and expose pivotal barriers at 0.9788/96 (Fibo 38.2%/falling daily Tenkan-sen).

Fundamentals are also not working in favor of Euro, as inflation in the EU is expected to rise further in September (Sep f/c 9.7% vs Aug 9.1%) and probably reach a double-digit levels in the near future, while the latest polls showed that the Federal Reserve will likely raise its key interest rate much higher than recently predicted, that would additionally boost dollar and further darken Euro’s outlook.

Res: 0.9600; 0.9655; 0.9691; 0.9788.
Sup: 0.9535; 0.9402; 0.9325; 0.9301.