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EURUSD Market Update

1/26/2023 2:08 PM

The EUR/USD pair continues to grow for the fourth month in a row, reaching the maximum levels of April last year around 1.0925 this week. The main factor supporting the position of the euro is currently the difference in the approaches to the monetary policy of the US Fed and the European Central Bank (ECB). Thus, investors expect the US regulator to slow down the pace of interest rate hikes from 50 basis points to 25 basis points already at the February meeting, while the European agency is likely to keep the adjustment step of 50 basis points for at least a few more months to make sure of the final decline in inflation.

Macroeconomic statistics also contribute to the strengthening of the single currency. Thus, the business activity of the leading economic sectors of the USA continued to slow down in January (the index in the industrial sector was 46.8 points, and in the services sector — 46.6 points), while in the eurozone the indicator in production was 48.8 points, and in the services sector — 50.7 points. The data published yesterday on the business climate in Germany from the Institute for Economic Research (IFO) turned out to be positive: the business optimism index in January increased from 88.6 points to 90.2 points, the indicator of economic expectations — from 83.2 points to 86.4 points, and the indicator of the assessment of the current situation, on the contrary, dropped from 94.4 points to 94.1 points. In general, German business assesses the current economic situation as difficult, but is confident of its improvement in the near future.

Today, the market will follow the preliminary data on gross domestic product (GDP) in the USA for Q4 2022: the US economy is likely to show a slowdown from 3.2% to 2.6%, which may put additional pressure on the dollar's position.

The price is close to 1.0930 (Fibonacci retracement 50.0%), the breakout of which will give the prospect of further growth to the levels of 1.1100 and 1.1230 (Fibonacci retracement 61.8%, the Murray level [6/8] for W1). The key for the "bears" is the 1.0742 mark (Murray level [8/8]), supported by the middle line of the Bollinger Bands. In case of its breakdown, a decline will be possible to the levels of 1.0498 (Murray level [6/8]) and 1.0253 (Murray level [4/8]), however, this option of movement seems less likely.

Technical indicators point out the continuation of the upward trend: the Bollinger Bands and the Stochastic are directed upwards, and the MACD is increasing in the positive zone.

Resistance levels: 1.0930, 1.1100, 1.1230. | Support levels: 1.0742, 1.0498, 1.0253.

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