EUR/USD Forecast: Steady at $1.0750 Post-Powell Speech, ISM Data

The EUR/USD pair maintained its position near $1.0750 in the Asian trading hours of Tuesday, responding to the recent downturn triggered by US Federal Reserve Chair Jerome Powell’s hawkish statements and robust US ISM Services data.

Impact of US Economic Indicators

January’s US ISM Services PMI outperformed expectations with a print of 53.4 against the forecasted 52.0, advancing from the prior month’s 50.5. The ISM Services Employment Index also improved, marking a rise to 50.5 from 43.8.

Inflation Watch and Policy Implications

Chair Powell underscored the importance of inflation’s path toward the 2% target, a comment that led to a rise in US Treasury yields and, as a result, placed the EUR/USD under pressure. The market’s reaction signals a reinforcement of the US dollar’s position in light of a possibly less expansive future monetary policy by the Fed.

European Economic Headwinds

On the other side of the Atlantic, the Eurozone’s economic outlook dampened slightly due to softer Producer Price Index (PPI) data, suggesting a disinflationary environment that may call for a potential policy shift by the European Central Bank (ECB).

The Organization for Economic Co-operation and Development (OECD) projects that inflation in Europe could remain above the ECB’s December 2 annual PPI in the Eurozone, showing a greater-than-anticipated contraction of 10.6%, beyond the forecasted 10.5% and November’s figure of 8.8%.

The monthly data aligned with expectations, revealing a 0.8% drop, matching the forecasted figure and following a previous decrease of 0.3%.

Looking Ahead

Market participants are closely observing remarks from Fed officials for further clues on the course of monetary policy. Additionally, the forthcoming release of the Eurozone’s December retail sales figures will offer further insight into the Eurozone’s economic stance.

EUR/USD Price Forecast: Technical Outlook

The EUR/USD pair is trading with a subtle rise, displayed at $1.07488, with the 4-hour chart stabilising after recent movements. The pivot point for the currency pair is at $1.07886, which the green line denotes as a crucial junction.

Resistance levels are seen at $1.08215, $1.08445, and $1.09002, which may cap upward moves. Supports, conversely, are established at $1.06711, $1.06136, and $1.05672, providing potential floors for any retracements.

Technical indicators show the Relative Strength Index (RSI) at 41.23, suggesting that the market is not in overbought territory, which could entice buyers. The 50 EMA (Exponential Moving Average) is currently at $1.08215, acting as a resistance zone after the price drop.

Chart analysis reveals an oversold condition with the formation of a Doji candle at the $1.0723 support level. This candlestick pattern indicates indecision but could also signal a potential reversal if the market sentiment shifts, providing a favourable condition for buyers above this level.

In conclusion, the trend is neutral, with a bullish inclination if the price sustains above $1.0723. A break above this could signal a buying opportunity, with traders likely to closely monitor the pivot and immediate resistance levels.

EUR/USD Live Chart