EURUSD Analysis and Forecast

EUR/USD Forecast: Euro needs to capture 0.9740 to extend rebound

(Eren Sengezer – FXStreet)

– EUR/USD has lost its recovery momentum on Thursday.

– ECB policymakers hint at a 75 bps hike in October.

– Eyes on German inflation figures, US GDP data.

EUR/USD has turned south and declined below 0.9700 early Thursday after having gained more than 100 pips on Wednesday. In order to extend its recovery, the pair needs to rise above 0.9740 and start using that level as support.

The broad-based selling pressure surrounding the greenback helped EUR/USD gain traction on Wednesday. The positive shift witnessed in market sentiment weighed on the dollar and the pair managed to stretch higher during the American trading hours. Safe-haven flows, however, started to dominate the market on Thursday, suggesting that yesterday’s market action was an overdue correction. At the time of press, US stock index futures were down between 1.1% and 1.3%, pointing to a risk-averse market atmosphere.

Meanwhile, several European Central Bank (ECB) policymakers noted that they are leaning toward a 75 basis point hike in rates in October, allowing the shared currency to stay resilient against its rivals. ECB Governing Council members Robert Holzmann and Gediminas Simkus both said that a 75 bps increase in rates at the next policy meeting would be appropriate. On a dovish note, policymaker Mario Centeno argued that a faster increase in rates than warranted may backfire and added that he was not observing a deanchoring of inflation expectations in the euro area.

Investors expect the annual Harmonised Index of Consumer Prices (HICP) in Germany to rise to 10% in September from 8.8% in August. A strong inflation reading in Germany should help the euro hold its ground and vice versa.

In the second half of the day, the US Bureau of Economic Analysis will release its final estimate for the annualized Gross Domestic Product (GDP) growth for the second quarter. Unless there is a significant revision to the GDP reading, markets are likely to ignore that data.

Market participants will keep a close eye on US stocks and if Wall Street’s main indexes suffer heavy losses after the opening bell, the dollar could preserve its strength and make it difficult for EUR/USD to shake off the bearish pressure.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart stays near 50 and EUR/USD trades slightly above the 20-period SMA, which is currently located at 0.9635. As long as this level stays intact, the pair could try to stage another rebound. On the upside, 0.9670 (Fibonacci 23.6% retracement of the latest downtrend) aligns as immediate resistance before 0.9700 (psychological level) and 0.9740 (Fibonacci 38.2% retracement). If the pair manages to stabilize above that last hurdle, sellers could move to the sidelines and open the door for additional gains.

0.9635 (20-period SMA) forms first support before 0.9600 (psychological level) and 0.9550 (static level, the end-point of the downtrend).

EUR/USD: Strong reaction but of short duration

(Vasilis Tsaprounis – TopFX)

The common European currency is again under intense pressure having lost a significant part of yesterday’s gains approaching again 0.9600 levels.

Yesterday was marked by a significant rise in the European currency of over 200 basis points fully confirming our assessment that the reaction will be seen in the foreground even with a little delay.

The strategy to buy the pair at new lows did not disappoint us once again.

The maintenance of trading range within the weekly channel which has started the downtrend path since May 2021 continues to have high fidelity in with the exchange rate reacting whenever it approaches the lower line of the descending channel.

Here we must draw attention that several times before the long-term change of direction there are violent behaviors, the volatility widens significantly and the pair temporarily moves outside of each channel.

The basic question of whether we are close to the absolute bottom is of course difficult to answer but we may not be far.

The day is characterized by a rich calendar in macroeconomic news, the most important of which is the German inflation prices and the growth rates in US.

So a trading environment with increased volatility is expected and although there is again a bearish trend the reactions are expected to reappear.

EUR/USD outlook: Bears regain control after bulls got trapped at pivotal Fibo barrier

(Slobodan Drvenica – Windsor Brokers)

The Euro returned to red in early Thursday’s trading and has already retraced a half of Wednesday’s 1.5% recovery rally, after traders reacted on oversold conditions.

It seems that bounce was short-lived, as recovery repeatedly failed to clearly break above pivotal Fibo barrier at 0.9732 (Fibo 38.2% of 0.0050/0.9535 bear-leg), generating an initial signal of a bull trap.

Bearish daily studies support the action, allowing limited price adjustments on oversold conditions and complementing strongly Euro-negative fundamentals.

Today’s close below broken Fibo 23.6% at 0.9657 would confirm that bears regained control and open way for retesting new 20-year low at 0.9535, violation of which would risk drop towards psychological 0.90 support.

However, long-legged Doji candle is forming on weekly chart and suggesting that bears may take an extended breather before resuming larger downtrend.

Fibo level at 0.9732 marks solid resistance which should keep the upside protected and guard pivotal barrier at 0.9793 (50% retracement / falling 10DMA).

Res: 0.9732; 0.9750; 0.9793; 0.9812.
Sup: 0.9635; 0.9600; 0.9569; 0.9535.