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European Currency Slowly Recovers Positions

1/25/2023 10:37 AM

The EUR/USD pair shows a slight increase during the Asian session, testing 1.0900 for a breakout. The euro has maintained a moderate positive momentum since January 19, but the activity of the "bulls" has been noticeably declining lately, as investors prefer to wait for new drivers to appear on the market.

Yesterday, data on business activity in the eurozone from S&P Global for January were presented: the Manufacturing PMI rose from 47.8 points to 48.8 points, which was higher than market expectations at the level of 48.5 points, and the Services PMI rose from 49.8 points to 50.7 points, also beating the forecast of 50.2 points. In turn, the Composite Manufacturing PMI strengthened in January from 49.3 points to 50.2 points, while experts predicted 49.8 points. In addition, the German Consumer Sentiment index from Gfk Group for February was presented the day before, which slowed down the negative dynamics from -37.5 points to -33.9 points, while the forecast was -33.0 points, confirming the improvement in consumer sentiment against the backdrop of correction in energy prices; however, private consumption is still quite low.

Support for the single currency is also provided by expectations of a further increase in the interest rate by the European Central Bank (ECB) while reducing the rate of increase in the rate from the US Federal Reserve. At the next two meetings of the European regulator, the first of which will be held next week, the rate can be adjusted by 50 basis points, while the US department is expected to raise it by only 25 basis points. The focus of investors today is statistics from Germany on the level of business optimism from the Institute for Economic Research (IFO) for January.

Bollinger Bands in D1 chart show active growth. The price range is narrowing, reflecting rather ambiguous dynamics of trading in the short term. MACD indicator is growing, having formed a new buy signal (located above the signal line). Stochastic keeps its upward direction but is approaching its highs, which reflects the risks of overbought euro in the ultra-short term.

Resistance levels: 1.0925, 1.0957, 1.1000, 1.1051. | Support levels: 1.0850, 1.0800, 1.0759, 1.0700.

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