Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The cool inflation data from the Eurozone added to the EURUSD currency pair’s woes, leaving the pair on course for a fifth consecutive week of losses. Eurozone inflation slowed to 5.3% in July 2023, the lowest since January 2022, in line with expectations. This was mainly due to a decline in energy prices, but core inflation remained high at 5.5%. The inflation report raised sentiment of easing pressures on the ECB to continue hiking rates, weighing on the Euro during the session. 

The pair has declined over 0.8% for the week as investors weigh concerns about China’s economy against the prospect of more rate hikes from the US Federal Reserve, following a more hawkish Fed meeting minutes released earlier in the week. The Euro could continue under pressure if China’s economy continues to slow, as this could weigh on global growth and likely boost the safe-haven US dollar. 

Technical 

On the 4-hour chart, the EURUSD currency pair is currently trading at 1.08639, situated within a falling wedge trading pattern. The falling volume indicator suggests a decrease in market activity, possibly signalling a period of consolidation. The Relative Strength Index (RSI) shows a higher high below the RSI-based Moving Average (MA), indicating potential upward pressure despite the prevailing downtrend. 

Presently, the price remains below the downward-sloping 50-Exponential Moving Average (EMA) and the daily pivot point, underscoring the bearish sentiment. Should the pair sustain a push lower, the first support lies at the 1.08462 level, followed by the 1.08160 price level. 

Alternatively, a sustained upward movement breaking through the daily pivot and the wedge pattern might encounter significant resistance at the 1.09252 resistance level, enforced by the 50-EMA. A sustained push above this level could lead to further gains up to 1.09619. 

Summary 

The pair has been under bearish pressure this month, but the technical indicators are slightly bullish for the pair in the shorter timeframe. However, the price is still below the key resistance levels, so a breakout is not guaranteed.  

Therefore, should the bears maintain dominance in the short term, the 1.08462 support level might come into play in the short term. However, a potential for a breakout to the upside remains should the bears’ downward momentum continue to lose pace and volume. 

Sources: Trading Economics, TradingView, Reuters, EUROSTAT

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