The EUR/USD currency pair finished the week with slight losses, closing around the 1.1620 area. The pair has made very little attempt to move higher over the past few days. This shows a very tentative near-term posture since it still sits under key moving averages. Even worse, the 20-day simple moving average (SMA) has rolled over. It has since now fallen just below the 100-day SMA, indicating a shift in market sentiment.
Since those recent bullish trading sessions, EUR/USD has been unable to maintain upward momentum, with the weekly momentum heading towards negative territory. The Relative Strength Index (RSI) has advanced to 46.4, up from multi-year lows. Even with that inclusion, the index remains below the all-important 50 mid-line, indicating continued softness in market momentum. What this means is that while there is some modest potential for recovery, there remains substantial resistance to doing so.
Technical Analysis and Market Indicators
A steady close over the 1.1655-1.1660 ceiling is needed to restore upside vigor in the EUR/USD pair. Now trading in the vicinity of 1.1630, the cross has near-term resistance that has held firm in recent weeks.
Support ahead of EUR/USD is seen at the October low around 1.1540 area. This is the key level, as if breached, it would only snowball into further downside and lack of confidence in the market. Longer-term traders in particular will be focused on the ascending 200-day SMA at 1.1285. This level is now serving as an important buffer point for the pair. The medium- and long-term baselines are all trending upward. This suggests that despite weak short-term prospects, the broader price-setting environment remains supportive.
This bullish story builds further strength with the 100-week SMA located at 1.1010. At the same time, the 200-week SMA is rising, now at 1.0836. All these indicators point to a positive long-term outlook for the EUR/USD, even if things have taken a turn for the worse recently.
Economic Context and Business Activity
The economic picture surrounding the Eurozone has been very important in guiding EUR/USD fundamentals. Recent data from Hamburg Commercial Bank (HCOB) highlighted a significant development:
“The strongest increase in new orders for two-and-a-half years supported a faster expansion in Eurozone business activity in October, according to provisional PMI survey data.”
The increase in new orders reflects a robust rebound in business activity. If left unabated, this trend will continue to strengthen the Euro against the US Dollar.
As traders continue to anticipate the future, upcoming announcements from both the Federal Reserve and European Central Bank will be critical. Though these announcements are not undertaken directly to affect currency values, their significant anticipated effects on monetary policy and economic forecasts could have a major impact on currency valuations.
Market Sentiment and Future Outlook
Additionally, market sentiment is cautious as traders look for clearer signals as to economic direction from both sides of the Atlantic. The current trading range for EUR/USD indicates some strong sideways consolidation. That said, get ready for more volatility as the next batch of crucial economic data and central bank statements come out.
The already bullish 20-week SMA looms large above the market at 1.1680 or so. If other market conditions turn positively, that would be what really set off an upward chain reaction. A clean break above this level would do wonders to build back bullish trader enthusiasm and could bring in a wave of new buying pressure.