The euro continued to build on its marginal gains against the US dollar, gaining 0.15% to trade at 1.07704 at 11:05 GMT. The EUR/USD pair seems to have absorbed the shocks brought about by a strong dollar outlook over the past three days and looks set to launch a comeback. In the absence of impactful US economic data today, the euro will likely leverage to make some gains.
The euro continues to face headwinds caused by slow economic activity in the Eurozone. The block’s largest economy, Germany, saw its December industrial production fall by -1.6%, exceeding the projected decline of -0.4%. Similarly, the French economy reported a negligible 0.0% growth in Non-farm payrolls, against a projected drop of -0.1%.
Germany’s 8.9% growth in factory orders in December against a projected -0.1% decline has also bostered the euro’s outlook. Scheduled speeches by three FOMC members later in the day will almost certainly have no significant impact on EUR/USD. This is because the Fed already defined its next course of action last week and the positive economic data thereafter means no surprises await today.
The European Central Bank has already pronounced itself on its rates policy, choosing to prioritise inflation control. However, high energy bills in the block could curtail consumer spending and slow down economic recovery. On the other hand, the dollar could cede some ground against the euro if Israel and Hamas agree to a truce. The two warring factions have been working towards a peace deal brokered by Qatar and a visit by US Secretary of State Antony Blinken could speed up the process. The safe haven greenback tends to rise in times of geopolitical crises as investors adopt a risk-off approach.
The RSI favours upward movement as it stays above 9 MA. EUR/USD will likely stay above 1.0740 and target 1.0770. A break above this level will see the bulls aim for 1.0785. However, if the momentum slows down and the pair crosses below the pivot 1.0740, we the euro could find support at 1.0720, beyond which the market will likely establish a psychological support at 1.0700.
EUR/USD 30 minute chart
This post was last modified on Feb 07, 2024, 11:48 GMT 11:48