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EUR/USD Overview & Technical Analysiss

Fundamental Summary

Based on the current summary of positive and negative influences affecting the EUR/USD, and as long as the Fed keeps its agg ressive policy, we believe that the USD will remain stronger. Therefore, our short-term fundamental for the EUR/USD pair is BEARISH.

Europe: Key economic events

Negative Current account recorded a €20 billion deficit

With a negative change over the previous month, the Eurozone's current account balance fell short of market expectations. September's current account balance was -19.9B, down from 4.2B the month before. Imports boost foreign currency demand, whereas exports decrease foreign currency inflows. The combined impact lowers the exchange rate. When exports exceed imports, the opposite occurs.

Positive Consumer Price Index increased by 0.6%

The Eurozone Consumer Price Index increased by 0.6 percent in August, up from 0.1 percent the previous month and above the forecasts to 0.5 percent. The CPI increased by 9.1 percent year-over-year. When inflation rises, policymakers often set higher benchmark interest rates to dampen the economy and subdue the inflationary trend. In turn, the higher a country’s interest rate, the more likely its currency will strengthen. Conversely, countries with lower interest rates often have weaker currencies.

Negative Trade Balance posted a €34 billion deficit

This week, Europe's disappointing macroeconomic data affected both currencies. During the European session, the shared currency was hit by the EU July trade balance, which posted a seasonal trade deficit of -34.0B, lower than expected - 20.0B. A country with a high demand for its goods tends to export more than it imports, increasing demand for its currency. A country that imports more than it exports will have less demand for its currency.

US: Key economic events

Negative Building Permits fell to 1.517M

The number of building permits issued for new homes fell in August as higher building and borrowing costs reduced demand. Building permits decreased by -10% to 1.517M which was less than analysts had predicted. Building permits serve as an advanced indicator, whereas housing starts serve as a current indicator. Building permits indicate an upcoming economic surge or plunge because of their scale and nature. The rise in building permits can indicate an increase in employment, increased consumption of goods and services, flourishing businesses, and so on.

Positive Retail Sales increased by 0.3 percent

On a month-over-month basis, Retail Sales increased by 0.3 percent, compared with analysts' consensus estimates of 0.2 percent. As well, the Core Retail Sales, which measures changes in retail sales excluding autos and gasoline, decreased by -0.3 percent. Retail sales are a strong indicator of the health of an economy and whether it is contracting or expanding.

Positive Initial Jobless Claims decreased

The number of Americans filing for unemployment insurance unexpectedly decreased last week, according to Labor Department data. Seasonally adjusted initial jobless claims totaled 213K, declining from a revised figure of 218K in the previous period. Economists had expected a worse reading of 226K. The strength of the US economy influences how the USD trades against other major currencies. It has to do with the fact that strong economies are usually associated with higher interest rates, which makes a currency more attractive. Initial claims readings that are higher than expected are likely to be seen negatively for the USD, while readings that are lower than expected are likely to be viewed positively.

Technical Analysis

When trying to optimize the timing of an investment, it's critical to analyze whether the pair looks overbought or oversold, and in which direction the momentum is moving. EUR/USD is now priced below its 5-day, 50-day, and 200-day moving verage, while its MACD (Moving Average Convergence Divergence) indicates that the pair's price movement momentum is weakening. Historically, this is a negative setup in the near, medium, and long-term. Meanwhile, looking at the Stochastic Oscillator and RSI (Relative Strength Index), EUR/USD doesn't strongly signal to be overbought or oversold. Overall, these technical indicators don't clearly signal directional momentum. Ther efore, this pair received a cumulative TA (Technical Analysis) score of 37.

Bearish 37
Close Price 0.997
52W Low 0.9864
52W High 1.1751
5D MA 0.9984
50D MA 1.0091
200D MA 1.0709
MACD -0.003
RSI 39.931
STOCH 33.444

This report, prepared and provided by Deshe Labs Ltd ("Deshe"), is intended for general guidance and information purposes only and under no circumstances is tailored to a specific factor or variable related to its reader or intended to be used, construed, or considered as financial or investment advice, an offer, a solicitation of any offer, a recommendation, or an offer to invest in, sell or buy the securities mentioned in this report or other form of a financial asset or as a marketing communication under FCA Rules. For the full disclaimer, click here.