EUR/USD Bangs Against the 50 Daily SMA, But Unlikely to Continue Higher

Posted Tuesday, October 24, 2023 by
Skerdian Meta • 2 min read

EUR/USD has been bearish since the middle of July, losing more than 8 cents in the process. Moving averages have been doing a great job in provising resistance and pushing the prie down, particularly the 20 SMA (gray) on the daily chart, which shows that the selling pressure has een quite strong. One of the reasons for this has been the surge in US Treasury yields, another factor has been the decent data from the US showing a resilient economy, while the Eurozone economy has been deteriorating.

This forex pair fell to 1.0450s early this month, but has made a comeback and yesterday it has cleared the high of 1.0640 set on October 11 and is now trading at its highest level since late September, as the price heads for 1.07. lthuogh there is resistamnce zone below that big round number and EUR/USD is also facing the 50 SMA (yellow) on the daily chart as well.

The retreat in the USD was the main reason of yesterday’s rise as it slipped lower in tandem with US bond yields. After the reversal in Treasuries yesterday, US 10s fell to 4.84%, down from as high as 5.025% earlier in the day. Bill Gross and Ackman both contend the economy isn’t as robust as it appears which might weigh on the US bonds yyields later on. The US Q3 GDP report is the main emphasis this week, but information from Q4 and later quarters will soon be released.

The EUR side of the equation, however, is susceptible to further economic underperformance. Germany is now experiencing a recession, and it will get worse in Q4. It’s likely that the ECB will be among the last to hike out, but also among the first to decrease. Today is a manufacturing day with European manufacturing and services PMI reports already released, showing that these sectors remain in recession, while the US manufacturing data will be released later on.