EUR/USD Forecast: Decline gains strength ahead of Fed’s speakers
|EUR/USD Current Price: 1.0695
- Mounting concerns of an additional Federal Reserve rate hike boost the US Dollar.
- Euro Zone macroeconomic data keeps pointing at an economic setback.
- EUR/USD pierces the 1.0700 level and maintains the bearish route.
The US Dollar retains its latest strength, with EUR/USD trading below the 1.0700 threshold for the first time since early June. Financial markets are looking for safety on Thursday, as generally solid United States (US) macroeconomic figures and fears the Federal Reserve (Fed) may hike rates one more time in November keep investors cautious while supporting the American currency.
The Euro, in the meantime, suffered from the downward revision of the EU Q2 Gross Domestic Product (GDP) from a preliminary estimate of 0.3% QoQ to 0.1%. The annual comparison was confirmed at 0.5%, below the 0.6% previously calculated. Additionally, German Industrial Production contracted by 0.8% MoM in July and 2.1% from a year earlier, worse than anticipated.
At the same time, stock markets can not lift their heads. The Fed’s Beige Book, published on Wednesday, reported that many businesses anticipate a slowdown in wage increases in the near future, overall positive. However, multiple Fed officials somehow confirmed the fears as President of the Federal Reserve Bank of Boston, Susan Collins, noted that further tightening may still be necessary. Also, former Fed member James Bullard said one more rate increase this year is likely. Still, it is worth noting Bullard has resigned from his Fed position to move to the education sector. More Fed speaks are scheduled today, and their words could spread additional US Dollar demand.
Ahead of Wall Street’s opening, the US published Initial Jobless Claims for the week ended September 1, which rose by 216K, much better than the 234K anticipated. Furthermore, the country released Q2 Nonfarm Productivity, up 3.5% and below the 3.8% expected, and Unit Labor Costs for the same period, up 2.2%, beating expectations.
EUR/USD short-term technical outlook
The daily chart for the EUR/USD pair favors a downward extension. The pair has extended its slide below all its moving averages, and the 20 Simple Moving Average (SMA) heads firmly south between the longer ones, reflecting the increasing selling momentum. At the same time, technical indicators gain downward traction within negative levels, without signs of downward exhaustion and with room to extend their slides.
The near-term picture is also bearish. Technical indicators turned sharply lower in the 4-hour chart, with the Relative Strength Index (RSI) maintaining its downward slope at around 25. The Momentum indicator also heads south within negative levels and with an almost vertical slope, in line with lower lows ahead. Finally, a firmly bearish 20 SMA extended its slide below also bearish longer moving averages, providing dynamic resistance at around 1.0750.
Support levels: 1.0670 1.0630 1.0595
Resistance levels: 1.0720 1.0755 1.0790
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