- The US Dollar gains momentum ahead of US data.
- The ECB is expected to keep interest rates unchanged on Thursday.
- The EUR/USD maintains its bearish bias, remains above the 20-DMA.
The EUR/USD dropped for the second consecutive day, falling below 1.0600 due to a stronger US Dollar. Attention now turns to the European Central Bank (ECB) meeting and US economic data.
The German IFO Business Survey surprised to the upside, with the headline index at 86.9, surpassing expectations of 85.9. This marked the first increase since April. The Eurozone Central Bank reported a decrease in year-on-year private loans growth to 0.8% from 1% in August.
The ECB is expected to keep interest rates unchanged on Thursday, as inflation slows down and economic activity remains subdued. Discussions are expected to revolve around modifications to reserve requirements and the balance sheet. ECB President Christine Lagarde will likely maintain a hawkish tone, considering that inflation levels remain high and to appease the hawks within the Bank.
Housing data released in the US surpassed expectations on Wednesday. On Thursday, crucial data will be released, with a focus on Q3 Gross Domestic Product (including the Core Personal Consumption Expenditure Price Index). Additionally, Jobless Claims and Durable Goods Orders will be relevant. Robust data could further strengthen the US Dollar, while negative surprises could trigger a correction.
EUR/USD short-term technical outlook
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The EUR/USD continued its decline for the second consecutive day, extending the retreat from monthly highs. The slide found support above the 20-day Simple Moving Average (SMA) at 1.0560. Technical indicators on the daily chart present a mixed picture, with Momentum above the midline but trending downwards, and the Relative Strength Index (RSI) showing a positive slope but also turning south.
The pair is currently testing the support area around 1.0560. On the 4-hour chart, technical indicators point towards the downside. The key support level is an uptrend line around 1.0550. As long as the price remains above that level, a resurgence in the Euro's rally is possible. However, a break below would trigger further losses, initially targeting 1.0530 and then 1.0500. For the technical outlook to turn bullish, the Euro would need to rise above 1.0610.
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