Published on May 25, 2023

Daily Analysis For EUR/USD 25-05-2023

EUR/USD Analysis

Key Points for EUR/USD pair

• EUR/USD has recently reached a new low for the past four weeks, dipping to 1.0740, as the USD Index demonstrates considerable vigor amidst a cautious sentiment prevailing in the market.

• During the May meeting, Federal Reserve policymakers recommended a temporary halt in interest rate hikes, citing concerns over the ongoing banking turmoil. They suggested that the rate hike implemented earlier in May should be followed by a pause.

• The European Central Bank's decision to raise interest rates in the Eurozone is wreaking havoc on its economic outlook. The repercussions of these higher rates are proving to be catastrophic for the region's economic prospects.

• In terms of technical analysis, the EUR/USD currency pair has approached and touched the 61.8% Fibonacci retracement level at 1.0738.

Today's Scenario: - The EUR/USD currency pair is currently trading with a slight bearish bias, hovering around the mid-1.0750s. Euro bears have taken a momentary pause after pushing the pair to its lowest levels since late March during the mid-Asian session on Thursday.

The decline in the EUR/USD can be attributed to cautious market conditions prevailing at the moment. However, it's important to note that concerns have been mounting regarding the possibility of the US defaulting on its debt payments in early June. This uncertainty has weighed on the sentiment in the market and has put pressure on the EUR/USD. Despite these concerns, there is optimism among policymakers that a deal will be reached to extend the debt ceiling, and mixed comments from the Federal Reserve have allowed the US dollar to stabilize at a multi-month high.

Meanwhile, the US Dollar Index (DXY) is fluctuating near a nine-week high, supported by stronger Treasury bond yields. However, the recent improvement in S&P500 Futures, despite a negative close on Wall Street, is providing some support to the EUR/USD, preventing further downside.

Diagram of EUR/USD EUR/USD

Economic Events: -

GMT	Event	Impact	Currency
00:01	(United Kingdom) Car Production YoY	Low	GBP
00:50	(Japan) Foreign Bond Investment	Low	JPY
00:50	(Japan) Stock Investment by Foreigners	Low	JPY
01:00	(Australia) RBA Payments System Board Meeting	Low	AUD
04:35	(Japan) 40-Year JGB Auction	Low	JPY
07:00	(Germany) GDP Growth Rate QoQ	Medium	EUR
07:00	(Germany) GDP Growth Rate YoY	Medium	EUR
07:00	(Germany) GfK Consumer Confidence	High	EUR
07:45	(France) Business Confidence	Medium	EUR
07:45	(France) Business Climate Indicator	Low	EUR
08:00	(Spain) PPI YoY	Low	EUR
09:30	(Slovenia) Tourist Arrivals YoY	Low	EUR
09:30	(Slovenia) Business Confidence	Low	EUR
10:00	(Euro Area) ECB Annual Report 2022	Low	EUR
10:00	(Euro Area) ECB Guindos Speech	High	EUR
10:10	(Italy) BTP Short Term	Low	EUR
11:00	(United Kingdom) CBI Distributive Trades	Medium	GBP
11:00	(Latvia) Unemployment Rate	Low	EUR
12:00	(Canada) CFIB Business Barometer	Low	CAD
13:30	(Canada) Manufacturing Sales MoM	Low	CAD
13:30	(United States) Jobless Claims 4-week Average	High	USD
13:30	(United States) Continuing Jobless Claims	High	USD
13:30	(United States) Initial Jobless Claims	High	USD
13:30	(United States) Chicago Fed National Activity Index	Medium	USD
13:30	(United States) Real Consumer Spending QoQ	Low	USD
13:30	(United States) GDP Sales QoQ	Low	USD
13:30	(United States) Core PCE Prices QoQ	Low	USD
13:30	(United States) PCE Prices QoQ	Low	USD
13:30	(United States) GDP Price Index QoQ	Medium	USD
13:30	(United States) Corporate Profits QoQ	Medium	USD
13:30	(United States) GDP Growth Rate QoQ	Medium	USD
13:30	(Canada) Average Weekly Earnings YoY	Low	CAD
15:00	(United States) Pending Home Sales YoY	Medium	USD
15:00	(United States) Pending Home Sales MoM	Medium	USD
15:30	(United States) EIA Natural Gas Stocks Change	Low	USD
15:30	(United States) Fed Collins Speech	Medium	USD
16:00	(United States) Kansas Fed Composite Index	Low	USD
16:00	(United States) Kansas Fed Manufacturing Index	Low	USD
16:30	(United States) 8-Week Bill Auction	Low	USD
16:30	(United States) 4-Week Bill Auction	Low	USD
17:30	(United Kingdom) BoE Haskel Speech	Low	GBP
18:00	(United States) 7-Year Note Auction	Low	USD
23:00	(New Zealand) ANZ Roy Morgan Consumer Confidence	Low	NZD

Buy Scenario: - A daily close above the 100-DMA level of 1.0815 does not guarantee immediate bullish momentum for the EUR/USD. The previous support line from September 2022, approximately at 1.0920, holds the key for potential buyer entry.

Subsequently, the psychological level of 1.1000 may act as an additional barrier for Euro buyers seeking further upside in the pair, till we do not advise to buy EUR/USD currency pair.

Sell Scenario: - The EUR/USD currency pair continues to remain at lower levels as bearish pressure pushes it towards the 1.0750 mark, reaching a fresh low not seen since late March during early Thursday in Asia. This marks the third consecutive day of decline for the Euro pair, breaching the weekly low as well as the two-month low recorded last week.

It is important to highlight that the EUR/USD reversed its course from the resistance posed by the 100-day moving average (DMA) and is supported by bearish signals from the MACD indicator, strengthening the bearish sentiment. However, the relative strength index (RSI) with a 14-day period indicates that the pair is nearing oversold levels, suggesting limited downside potential before a possible continuation of the downward trend.

Consequently, the bears in the EUR/USD are poised to break the support at 1.0750 and potentially target the round figure of 1.0700. However, market attention is drawn to an upward-sloping support line that originated in late November 2022, currently positioned near 1.0690.

In the event that the Euro pair breaches the aforementioned support line, the possibility of a decline towards the low of March at 1.0515, followed by the yearly low marked in January around 1.0480, cannot be disregarded. Till then we do not advise selling EUR/USD.

Support and Resistance Level: -