EUR/USD Prices Forecast: Facing Headwinds Amid Hawkish Fed, European Economic Woes

Highlights

• Euro reacting to Federal Reserve’s decisions.
• European economic reports sketch somber scenario.
• High interest rates worldwide pressure business operations.

Euro’s Descent Amid Economic Slump and Hawkish Fed Stance

The Euro faces a downward trajectory against the U.S. Dollar, reacting sharply to the Federal Reserve’s interest rate decisions and the assertive tones of Chairman Jerome Powell. Concurrently, a series of economic reports from Europe sketches a somber economic scenario, with the EUR/USD trading at 1.0640, a drop of -0.21%.

Mixed Economic Signals from Europe

France’s economic indicators reveal a sharper-than-anticipated slump in September, casting shadows of concern. However, Germany paints a marginally brighter picture with improving Flash Manufacturing and Flash Services PMI reports. Yet, the overarching sentiment remains grim as the euro zone’s economy appears set for contraction, exacerbated by prolonged interest rate hikes from central banks. The HCOB’s flash euro zone Composite PMI underscores this sentiment, forecasting a 0.4% contraction this quarter.

Central Banks and Their Grip on Economy

Central banks worldwide, after two intense years of policy adjustments, signal their intent to maintain high interest rates to counter inflation. This stance casts a gloomy shadow over business operations, especially in Germany and France, Europe’s leading economies. While Germany grapples with the economic impacts of high energy prices, France’s dominant services sector contracts significantly due to declining demand and new order challenges.

Short-term Forecast: Euro Under Pressure

Considering the backdrop of the Federal Reserve’s consistent approach and the U.S. 10-year Treasuries reaching their highest yields since 2007, the Euro faces headwinds in the short term. Anticipations of a resilient U.S. economic performance, coupled with mounting concerns over the euro zone’s growth prospects, suggest that the EUR/USD may encounter further pressures and challenges ahead.

Technical Analysis

The EUR/USD market currently trades at 1.0640, subtly below its previous 4-hour price of 1.0646. The price is notably below the 200-4H moving average of 1.0909, signifying a dominant bearish momentum. Furthermore, it’s slightly below the 50-4H moving average of 1.0686, reinforcing the bearish outlook.

The 14-4H RSI stands at 41.55, indicating a weakened momentum but not drastically oversold.

In terms of support and resistance, the current price is hovering inside the main support area ranging from 1.0671 to 1.0638, and well below the main resistance area between 1.0766 and 1.0772. Based on the indicators, the market sentiment for EUR/USD on a 4-hour chart leans bearish.