EURUSD Technical Analysis

(Haresh Menghani – FXStreet)

– A combination of diverging forces failed to provide any meaningful impetus to EUR/USD on Tuesday.

– The USD languished near a multi-week low and offered support, though recession fears capped gains.

– Investors also seemed reluctant to place aggressive bets ahead of this week’s key data/event risks.

The EUR/USD pair is prolonging its recent range-bound price action on Tuesday and oscillated in a familiar trading band through the early European session. The US dollar continued with its struggle to gain any traction and languished near a three-week low amid expectations that an economic downturn would force the Fed to slow its policy tightening path. This, in turn, was seen as a key factor that offered some support to the major, though a combination kept a lid on any meaningful upside.

Investors remain concerned that a halt of gas flows from Russia could trigger a crisis in the Eurozone, which could drag the region’s economy faster and deeper into recession. Furthermore, the prevalent risk-off environment could underpin the safe-haven greenback and further contribute to capping gains for the EUR/USD pair. Investors might also be reluctant to place aggressive bets and prefer to wait for the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday.

The US central bank is widely expected to hike interest rates by 75 bps and leave the door open for further hikes. The Fed’s monetary policy outlook will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the EUR/USD pair. Investors will further take cues from important US macro data, starting with Tuesday’s release of the Conference Board’s Consumer Confidence Index later during the early North American session.

This week’s US economic docket also highlights the release of Durable Goods Orders data on Wednesday and the Advance Q2 GDP report on Thursday. This, along with the Personal Consumption Expenditures (PCE report) on Friday, will drive the USD demand. Apart from this, the flash Eurozone CPI print on Friday should provide some meaningful impetus to the EUR/USD pair. The upcoming data/event risks should keep traders on the sidelines, suggesting an extension of the subdued/range-bound price action.

Technical outlook

From a technical perspective, nothing seems to have changed much for the EUR/USD pair and the top end of a descending trend channel continues to cap the upside. The mentioned barrier is followed by the post-ECB swing high, around the 1.0275-1.0280 area, which should now act as a key pivotal point. Some follow-through buying, leading to a subsequent move beyond the 1.0300 mark would be seen as a fresh trigger for bulls. Spot prices might then accelerate the momentum and aim to reclaim the 1.0400 round figure.

On the flip side, the overnight low, around the 1.0180-1.0175 region, now seems to protect the immediate downside ahead of the 1.0130-1.0125 zone and the 1.0100 mark. A convincing break below the latter would suggest that the recent corrective bounce has run out of steam. The subsequent downfall would make the EUR/USD pair vulnerable and expose the parity mark. The downward trajectory could further get extended and force spot prices to challenge the YTD low, around the 0.9950 region touched earlier this month.