The Euro shows remarkable strength against the US dollar. Though small, during Thursday’s European trading session, it was able to get that 0.15% gain, climbing back up to just above 1.1615. Recently released German and Eurozone economic data have added to that stability. All eyes are on the upcoming major US–China bilateral meeting, particularly the planned summit between US President Donald Trump and China’s new helmsman, Xi Jinping, in South Korea. Sentiment among traders is turning to the defensive. They’re just hours away from a decision by the European Central Bank on interest rates, expected today.
This EUR/USD pair is now at 1.1610, a sign that we’ve seen some consolidation after some strong bounces earlier in the day. Sentiment and technical indicators are increasingly dark bearish. The 14-day Relative Strength Index (RSI) remains under the important 50 level. This implies that although the currency pair has received support, it might not go far enough in future.
Technical Analysis
These new market dynamics suggest that the EUR/USD pair will find formidable support at a two-month low. This new low, registered at 1.1542 on October 14, creates the conditions for more volatility. This level will be important for traders and investors seeking to enter on a reversal or further downtrend. If the duo should fall below this line of support, further downside selling pressure might be set in motion.
The short-term resistance for the EUR/USD pair is the nine-day Exponential Moving Average (EMA) of 1.1626. Directly behind it is the 50-day EMA at 1.1656. A rally above these key horizontal technical levels would be a sign that momentum has shifted and would offer a greater degree of clarity for traders.
The single currency has come under modest pressure following the release of German GDP numbers. Despite all of that, it has still been able to maintain its strength against the dollar, with forecast for flat 0% growth q-o-q in the third quarter. Germany’s annualized growth is soon to reach 0.3%. This growth rate is noticeably quicker than the 0.2% growth seen in the same quarter last year.
Economic Context
The Euro serves as the common currency for 20 nations within the Eurozone. Moreover, it is the most widely exchanged currency pair in the planet, accounting for about 30% of all the currency trading. The Euro has been strong against other currencies, particularly the Japanese Yen. Especially as they face a patchwork of bullish and bearish economic indicators, this trend brings good news.
Euro-optimists would argue the opposite, that the cause of the Euro’s strength is its relatively high interest rates. These interest rates have lured in investors hungry for more attractive yields. Market participants continue to take a wait-and-see approach. They’re looking at future economic indicators and central bank policy moves that will drive the next waves of currency movements.
Outlook Ahead
As traders continue to monitor trading activity ahead of the ECB’s upcoming interest rate decision, traders in the market have been cautiously optimistic. Germany continues to be the driving force behind expectations, with recent German economic data and recent developments in the broader Eurozone almost equally important. The impact of ECB decision on strengthening the Euro against the dollar is already strong and in place.