EUR/USD Current Price: 1.0792
- United States' soft macroeconomic figures revived recession-related concerns.
- The Euro Zone confirmed the Harmonized Index of Consumer Prices at 9.2% in December.
- EUR/USD retreats from a fresh 9-month high, turns bearish in the near term.
The EUR/USD pair retreated sharply from a fresh 2023 high of 1.0886 and finished Wednesday below the 1.0800 threshold, pretty much unchanged. The US Dollar benefited from dismal United States data bringing back recession fears to the table. The Greenback started the day with a soft tone, easing alongside global government bond yields, but recovered during the American afternoon, despite US Treasury yields remaining on the downward route.
Yields initially fell and weighed on the US Dollar as the Bank of Japan decided to stay put on monetary policy. Governor Haruhiko Kuroda spoke afterwards and noted that there is “no need to further expand bond target band.” The yield on the 10-year Japanese Government Bond (JGB) fell to an intraday low of 0.36% after flirting with 0.60% on Tuesday. Ahead of Wall Street’s opening, the United States released a batch of data which revived concerns about an economic recession.
The US Producer Price Index (PPI) rose at an annual pace of 6.2%, declining from 7.3% in November. On the other hand, December Retail Sales contracted by 1.1% MoM, while Industrial Production declined 0.7% in the same month, both missing the market expectations. On a positive note, MBA Mortgage Approvals for the week ended January 13 were up a whopping 27.9%, as interest rates dropped to their lowest point in months. Nevertheless, US Treasury yields fell further as demand for safety soared.
Earlier in the day, the Euro Zone published the final estimate of the December Harmonized Index of Consumer Prices (HICP), which was confirmed at 9.2% YoY. Additionally, November Construction output declined 0.8% in the month, worse than anticipated.
On Thursday, the Euro Zone will release the November Current Account, while European Central Bank President Christine Lagarde is due to participate in a panel discussion titled "Finding Europe's New Growth" at the World Economic Forum in Davos. The central bank will release the Monetary Policy Meeting Accounts. Across the pond, the United States will have a lighter session, as the country will publish the usual weekly unemployment figures and December Housing Starts and Building Permits.
EUR/USD short-term technical outlook
The EUR/USD pair is having a hard time extending its rally. On the one hand, the pair remains above a critical Fibonacci support level, the 61.8% retracement of the 2022 decline at 1.0745. On the other, it’s clear that bulls are reconsidering their long positions and, for the moment, just holding the ground. Technical indicators in the daily chart have partially lost their upward strength but remain within positive levels. At the same time, the 20 Simple Moving Average (SMA) maintains its upward slope below the aforementioned Fibonacci level and well above the longer ones. Chances of a steeper decline could be triggered with a break of 1.0745.
In the near term, and according to the 4-hour chart, the risk skews to the downside. The pair is settling below a mildly bearish 20 SMA, although it holds above the longer ones, which still head north. Technical indicators, in the meantime, turned flat just below their midlines, favoring a slide without confirming it.
Support levels: 1.0745 1.0690 1.0650
Resistance levels: 1.0825 1.0870 1.0910
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