EUR/USD licks its wounds below 1.0500 ahead of Eurozone GDP
|- EUR/USD renews intraday high as bears take a breather after two-day downtrend.
- Fear of economic slowdown jostle with China-linked optimism to challenge market sentiment.
- Mixed comments from ECB policymakers, firmer German Factory Orders underpin bullish bias.
- Softer US trade numbers, absence of Fed talks add strength to the recovery hopes as traders await final reading of Eurozone Q3 GDP.
EUR/USD picks up bids to refresh intraday high near 1.0470 during early Wednesday. However, the quote remains on the bear’s radar as it fails to print major gains ahead of the final readings of the Eurozone Gross Domestic Product (GDP) for the third quarter (Q3).
The reason for the pair’s recent uptick could be linked to the market’s mixed sentiment and a lack of major data/events. However, broad-based fears of recession, recently backed by the United States Heads of Goldman Sachs, Bank of America Corp and JPMorgan Chase, keeps the EUR/USD bears hopeful.
That said, Bloomberg Economics also forecasted the lowest economic growth since 1993, to 2.4% for 2023.
Alternatively, hopes of China’s easing to its three-year-old Zero-Covid policy on Wednesday, per Reuters, underpin the bullish bias for the EUR/USD pair. Beijing’s latest move could be linked to the receding virus infections from the record high, as well as multiple announcements suggesting more unlocking of the virus-hit economy that’s the second biggest in the world.
Further, mixed comments from the European Central Bank (ECB) officials and mixed Eurozone data appear to challenge the EUR/USD bears.
On Tuesday, Constantinos Herodotou, Governor of the Central Bank of Cyprus and member of the ECB Governing Council said, “There will be another hike in rates, but we are very near neutral rate.” On the same line, ECB Chief Economist Phillip Lane expressed his take on inflation and interest outlook on Tuesday while saying, “Expect more rate hikes but ‘a lot has been done already’”. It should be noted that Germany’s Factory Orders for October improved to -3.2% YoY versus -7.5% market forecasts and -10.8% prior.
On the other hand, the US Goods and Services Trade Balance deteriorated to $-78.2 billion versus $-79.1 billion expected and $-73.28 billion prior.
Sluggish US Treasury bond yields and the stock futures favor the bullish bias for the EUR/USD pair as traders await China’s likely risk-positive announcements, as well as the Eurozone GDP. That said, the looming fears of the recession could weigh on the pair if the scheduled growth numbers drop below the initial forecasts of 0.2% QoQ and 2.1% YoY.
Technical analysis
EUR/USD trades inside a one-month-old rising wedge bearish chart formation. Also keeping the sellers hopeful are downbeat MACD signals and the steady RSI line, placed at 14.
However, a clear downside break of the 1.0420 support, as well as the sustained trading below the 200-DMA level surrounding 1.0355, becomes necessary for the EUR/USD bears to dominate further.
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