Technical Analysis

EUR/USD Price Analysis – Oct 25, 2023

By LonghornFX Technical Analysis
Oct 25, 20233 min

Daily Price Outlook

Despite the optimistic German IFO survey, the EUR/USD currency pair failed to stop its bearish sentiment and continued trading below the 1.0570 level. However, this downward trend can be attributed to the strengthening US dollar, which has regained stability after a minor decline on Tuesday. Meanwhile, investors are contemplating whether the European Central Bank (ECB) will halt its interest rate hikes. This is occurring despite inflation in the Eurozone surpassing the ECB's target, and concerns about a potential economic slowdown or even stagnation. If the ECB indeed decides to stop raising interest rates due to these inflation and economic worries, it could lead to a weaker Euro (EUR) and a decline in the EUR/USD pair.

German IFO Business Climate Index Up in October, Indicates Economic Improvement

It's worth noting that the German IFO Business Climate Index for October came in at 86.9, indicating an improvement from September's 85.8 and surpassing the market's expected figure of 85.9. Additionally, the Current Economic Assessment Index increased to 89.2 in October, up from September's 88.7 and exceeding the estimated value of 88.5. The IFO Expectations Index, which reflects businesses' outlook for the next six months, rose to 84.7 in October, compared to 83.1 in September, exceeding the market's consensus of 83.3.

Therefore, despite this positive data, the EUR/USD currency pair continued to trade with a bearish bias and did not receive any support.

US Dollar Stabilizes and Gains Strength on Improved Bond Yields and Fed's Rate Expectations

Moreover, the broad-based US dollar is regaining stability following a slight decline on Tuesday. This is driving the USD Index (DXY) closer to the 106.50 level. However, the recovery in the dollar can be attributed to the improvement in US bond yields across both short and long-term categories. In terms of monetary policy, many market participants now anticipate that the Federal Reserve (Fed) will maintain interest rates at their current levels during the November 1 meeting.

Hence, this belief was further reinforced by comments made by Fed Chair Jerome Powell in his recent speech at the Economic Club of New York. This news is exerting upward pressure on the USD, which could lead to a decline in the EUR/USD pair as the dollar strengthens against the euro.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis

The EUR/USD, the world's most traded currency pair, has positioned itself at 1.06034 as of October 25. By analyzing its 4-hour chart, several pertinent insights emerge. The currency pair's pivotal point stands at 1.0574, a significant figure that seasoned traders are likely to keep their eyes on.

The European currency faces a series of resistance levels. The immediate barrier stands at 1.0637, with subsequent challenges potentially coming in at 1.0682 and 1.0745. Should the currency pair experience selling pressures, it could find support at 1.0530, followed by 1.0466 and the more formidable 1.0422.

The Relative Strength Index (RSI) for EUR/USD reads 49, indicating a neutral stance. It's teetering on the edge of a bullish sentiment but hasn't quite crossed over. In another technical observation, the pair is trading above its 50-Day Exponential Moving Average (EMA) at 1.0589, suggesting a short-term bullish inclination. The chart pattern reveals an upward trendline offering robust support at 1.05891, buttressing the currency pair's current position.

Conclusion: The prevailing sentiment for EUR/USD can be termed as cautiously bullish, particularly if it sustains above the 1.0589 mark. As market participants evaluate the interplay of the outlined resistance and support levels, they'll likely focus on the immediate resistance of 1.0637 in their short-term projections.

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