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The Euro Develops a Downtrend

2/13/2023 10:43 AM

The EUR/USD pair shows a slight decrease, developing the "bearish" signal formed last Friday. The instrument is testing the level of 1.0665 for a breakdown, updating local lows from January 9.

Pressure on the single currency remains, as market participants are still concerned about rather high inflation in Europe, which periodically, as in the case of Germany, again demonstrates an upward trend. In addition, there is a threat of a recession in the economy, which reduces the room for maneuver for the European Central Bank (ECB). Nevertheless, the regulator is still unambiguously signaling in favor of a further increase in the interest rate, which provides significant support to the euro. At the last meeting, the ECB decided to increase the rate by 50 basis points. Given that the US Federal Reserve decided to adjust the rate by only 25 basis points, this allowed to reduce the difference in interest rates and provided additional support to the instrument.

On Friday, February 10, investors evaluated the publication of macroeconomic statistics in the US. Michigan Consumer Sentiment Index in February rose from 64.9 points to 66.4 points, which was higher than the expected 65.0 points. The monthly report pointed to a reduction in the US budget deficit in January from 85.0 billion dollars to 39.0 billion dollars, while the market expected an improvement in dynamics to only -63.0 billion dollars.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range expands, making way to new local lows for the "bears". MACD is falling, keeping a relatively strong sell signal (the histogram is below the signal line). In addition, the indicator is trying to consolidate below the zero level. Stochastic, having reached its lows, is trying to reverse in the direction of growth, signaling the risks of the single currency being oversold in the ultra-short term.

Resistance levels: 1.0700, 1.0765, 1.0800, 1.0850. | Support levels: 1.0654, 1.0600, 1.0550, 1.0500.

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