The EUR/USD currency pair stabilized just below the 1.1650 level, as risk-off sentiment caps the pair’s upside potential. This follows a notable decline toward the 1.1600 threshold, driven by the US Dollar’s recovery from earlier losses attributed to Federal Reserve Chair Jerome Powell’s statements. As the American trading session gets under way, EUR/USD hangs just above a pile of major moving averages. As of now, these averages have no directional strength at all.
Traders were encouraged after seeing the rebound from an intraday low of 1.1602. The duo is struggling to recapture its bullish mojo in the short term. Analysts note other technical signs that point to a lack of conviction in either direction for EUR/USD.
Technical Analysis Signals Limited Bullish Potential
EUR/USD is now trading right above a confluence of short-term moving averages. Yet these averages have had only modest directional conviction on the four-hour chart. Nearby support is at the 20 Simple Moving Average (SMA) at around 1.1620. This level is important to hold in order to stay out of the current price action rut, as it acts as a cushion of support against more downside.
Even with EUR/USD trading above all its moving averages, the bulls have not been able to seize back their earlier short-term positivity. All technical indicators point to stunted momentum. The Momentum indicator is currently hovering slightly above the 100 line, indicating that there is a lack of buying pressure. At the same time, the Relative Strength Index (RSI) remains stuck around 48, reinforcing that there is no directional momentum here.
Support is seen at 1.1620, 1.1570, and 1.1530 then resistance at 1.1700, 1.1740, and 1.1785. The absence of strong order flow in either direction indicates that traders shouldn’t get too comfortable in either their long or short futures positions.
Economic Factors Influencing EUR/USD Dynamics
As we have argued in the past, the recent economic data has helped move the EUR/USD landscape decidedly in one direction. Durable Goods Orders for the US fell less than anticipated in July according to this morning’s headline report. This recent development has increased uncertainty for currency traders. This important development not only matters for the next Federal Reserve policy meeting, but could shape ongoing market sentiment toward the dollar.
Scan the horizon of forthcoming economic indicators such as the August CB Consumer Confidence survey and the Richmond Fed Manufacturing Index. These reports are sure to move the EUR/USD pair in a big way. A higher than expected consumer confidence number would be very supportive of the US dollar. Conversely, if there are signs of weakness, this could give the euro an opportunity to strengthen.
In light of these economic variables, market participants remain alert to potential shifts in sentiment that could impact the exchange rate.
Market Sentiment and Risk-Off Environment
Market sentiment currently reflects a risk-off environment, which tends to favor safe-haven currencies like the US dollar over riskier assets. With traders still eyeing significant risks stemming from the domestic economy and the geopolitical landscape, this cautious mood will likely continue to weigh on any bullish advances in EUR/USD.
The prospect of a global economic recovery continues to hang over the heads of investors like a dark cloud. In a reflection on realistic expectations for service in 2023, one savvy market analyst emphasized persistent global supply chain woes. Persistent inflationary pressures have traders on high alert.
Traders are similarly watching comments from key figures in the global trade space with equal fascination. Recently, former President Donald Trump remarked on global digital taxes and tariffs:
“I put all Countries with Digital Taxes, Legislation, Rules, or Regulations on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country’s Exports to the U.S.A.”
These types of comments can certainly move markets and affect investor happiness about pairs like EUR/USD.