EUR/USD Forecast: Risk skews to the downside despite a higher high
EUR/USD Current Price: 1.0541
- Financial markets remain cautious amid continued tensions in the Middle East.
- United States Retail Sales came in much better than anticipated, up 0.7% in September.
- EUR/USD retreats sharply from an intraday high of 1.0578 gaining bearish traction.
The EUR/USD pair traded uneventfully around the 1.0550 mark throughout the first half of Tuesday, confined to a tight range, although buyers maintaining the upward pressure amid persistent US Dollar’s weakness. Additionally, the Euro found support in upbeat German data, as the German ZEW Survey showed Economic Sentiment improved in October by more than anticipated. The index printed at -1.1 for the country and 2.3 for the Euro Zone, while the assessment of the current situation resulted at -79.9, worse than the previous -79.4 but better than the -80.5 anticipated by the market.
Meanwhile, financial markets remain cautious amid Middle East developments. The United States (US) President Joe Biden is planning a trip to Israel to work on a diplomatic solution to the escalating war between the country and the Palestinian group Hamas, although so far, the situation continues to escalate, with a humanitarian crisis in Gaza amid an imminent Israeli ground invasion.
Ahead of Wall Street’s opening, the US published September Retail Sales, which unexpectedly rose by 0.7% MoM, more than doubling the 0.3% expected. Later in the American session, the US will release September Industrial Production and Capacity Utilization and August Business Inventories. Federal Reserve (Fed) Governor Michelle Bowman will be on the wires. Bowman is on the hawkish side of the spectrum, as she said that further rate hikes will likely be needed to tame inflation.
EUR/USD short-term technical outlook
The EUR/USD pair retreats from an intraday high of 1.0578 following upbeat US Retail Sales and trades in its comfort zone around the 1.0540 threshold. From a technical point of view, the daily chart shows the pair cannot overcome a firmly bearish 20 Simple Moving Average (SMA), while the longer ones converge at around 1.0830. The Momentum indicator advances around neutral readings, but the Relative Strength Index (RSI) indicator has already turned south within negative levels, lacking enough downward strength but still hinting at easing buying interest.
In the near term, and according to the 4-hour chart, EUR/USD is neutral-to-bearish. The 20 SMA gains downward traction after crossing below an also bearish 100 SMA, with the pair briefly trading above them but quickly retracing. Finally, the Momentum indicator turned lower around its midline, while the RSI consolidates at around 46, skewing the risk to the downside.
Support levels: 1.0495 1.0450 1.0400
Resistance levels: 1.0570 1.0610 1.0650
Author
Valeria Bednarik
FXStreet
Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.
