EUR/USD Current Price: 1.0769
- Mixed words from Federal Reserve officials reinforce the market’s cautious stance.
- German Industrial Production fell sharply in December, weighing on the Euro.
- EUR/USD trades near its weekly high, but chances of a steeper advance seem limited.
Financial markets extend the cautious trading on Wednesday amid mixed comments from Federal Reserve (Fed) officials and Chinese woes, although the US Dollar remains under modest selling pressure. EUR/USD changes hands in the 1.0760/70 region, advancing for a second consecutive day, yet modestly.
On the one hand, Fed of Cleveland President Loretta Mester said that the central bank could lower interest rates at some point later this year but warned that it could be a “mistake” to cut too soon. On the other hand, Fed’s Philadelphia President, Patrick Harker, stated that a soft-landing is in sight for the United States (US) economy, although he also added that inflation is falling and that he sees real progress on getting it back to target. Finally, he noted the labor market is in a better balance.
Meanwhile, plummeting Chinese stocks have led to Beijing’s intervention these last few days, with major stocks losing over the 10% daily limit. Authorities aimed to increase liquidity and safeguard market stability through expanded purchases of exchange-traded funds linked to the country’s onshore stocks. Fears of contagion weigh on the market’s mood. Asian shares traded mixed, while European indexes struggle to post gains, conditioning Wall Street ahead of the opening.
Data-wise, Germany reported that Industrial Production in December slid by 1.6% in the month and 3% from a year earlier. Across the pond, the US published MBA Mortgage Applications for the week ending February 2, which increased by 3.7%, improving from a previous 7.2% contraction. The country will shortly unveil the December Goods and Services Trade Balance, while several Fed speakers will be on the wires throughout the American afternoon.
Finally, government bond yields ticked higher, maintaining the positive tone but lacking momentum at the time of writing. The 10-year Treasury note currently offers 4.13%, up 4 basis points (bps).
EUR/USD short-term technical outlook
The EUR/USD pair shows no actual bullish momentum despite posting gains for a second consecutive day, as it still trades below its weekly high of 1.0783. Technical readings in the daily chart suggest the bullish potential is limited. The pair develops below all its moving averages, with the 100 Simple Moving Average (SMA) at around 1.0785, reinforcing the resistance area. The 20 SMA, in the meantime, extends its bearish slope above the longer one, another sign of bears’ dominance. Finally, technical indicators turned modestly higher, but remain within negative levels, reflecting limited buying interest.
The 4-hour chart suggests buying interest has given up. EUR/USD cannot overcome a firmly bearish 20 SMA, struggling around it, while the longer moving averages keep heading south far above the shorter one. At the same time, technical indicators have pared their advances within negative levels and turned neutral below their midlines.
Support levels: 1.0720 1.0695 1.0650
Resistance levels: 1.0785 1.0840 1.0880