EUR/USD Price Forecast: Euro Bulls Fight Exhaustion Below the 1.1100 Level

EUR/USD FUNDAMENTAL BACKDROP

EURUSD ticked higher this morning following the European open having held above the psychological 1.1000 level last week. Euro bulls do appear slightly exhausted with the 1.1100 level proving a hurdle too far at present.

Friday delivered further positives for the US labor market with a positive NFP followed by strong unemployment and growing hourly earnings data. Despite the data market participants held back from adjusting their expectations for the Fed June meeting. One would think a bigger change in the probabilities for the June meeting would be in order, however it appears attention may be shifting to whether the US can stave off a recession rather than the expected peak rate by the US Federal Reserve. Of course, the rate hike path and peak rate will remain key, but market participants appear to have their attentions focused elsewhere following last weeks Fed meeting.

The Eurozone Sentix Investor Confidence index came out this morning with the poll conducted between the May 4-6. Not a pretty picture with the index indicating declines across the board, the overall economic index for the euro zone loses 4.4 points to a level of -13.1 points, wiping away a large part of the easing signals from previous months. The Expectations index hit its lowest level since December 2022 coming in at -19.0 in May from -13.0 in April. According to the report, the economy appears to be showing signs of tiredness while the ‘laborious” economic recovery of 2023 seems to have fizzled out. The report also shared concerns that the US is starting to show signs of economic weakness while in the international context, no economic region can stand out positively. The issue of stagflation remains imminent, and the risks of a global recession are rising once again. Despite this lackluster report EURUSD remain unfazed holding onto gains around the 1.1050 mark as we head toward the US open.

image1.png

ECONOMIC DATA AND RISK EVENTS AHEAD

As we begin the new week, we still do have some high impact risk events ahead of us. Today however is relatively subdued on the calendar front with a few Central Bank speakers and US data.

We do have some wholesale inventories data and the loan officer survey. The loan officer survey is an interesting one given that usually market participants wouldn’t pay much attention to it, however given the ongoing fears around US Regional Banks this may be interesting. Any effect from the survey on risk sentiment could dent EURUSD as it attempts to tick higher.

image2.png

TECHNICAL OUTLOOK AND FINAL THOUGHTS

From a technical perspective, EURUSD remains in a broader term uptrend while trading within an ascending channel of sorts. Very similar to the price action we had seen from November 2022 to early February 2023 where EURUSD staircased its way higher within an ascending channel.

The 1.1000 handle held firm last week as Euro bulls appear exhausted. We saw a third attempt at the 1.1100 handle in as many weeks as EURUSD has failed to push on since finding acceptance above the 1.1000 psychological level. The pair might need a catalyst to facilitate further upside, something like US inflation data out later this week.

For now, close attention must be paid to the 1.1100 mark with another rejection here likely to see another retest of the 1.1000 mark. A break of 1.1000 brings the 1.0950 and 1.0900 levels into focus. A break and acceptance above 1.1100 may see ups test the top of the channel around the 1.1190 mark, which was the swing high in March 2022.

EUR/USD Daily Chart – May 8, 2023

 

Tags: No tags

Add a Comment

Your email address will not be published. Required fields are marked *