• The euro falls to a six-week low against the US dollar.
  • Flash PMIs should set the tone on Wednesday.
  • The next hurdle comes from the 100-day moving average.

There was no change in the risk-on sell bias on Tuesday, further hurting the Euro in forex trading and sending the EUR/USD pair to new multi-week lows in the 1.0820 area.

The persistence of the strong buying bias of the US dollar has contained risk appetite and pushed the DXY index to a new yearly high around 103.80, at the same time helped by the rise in US yields, especially in the belly and over the long part of the year. the curve and the dominant environment of risk aversion.

In light of the upcoming rate decision of the European Central Bank (ECB), it is worth noting that market participants have already forecast rate cuts of around 120 basis points for the current year, and that a growing debate remains between market participants and ECB policymakers regarding the timing of the decision to initiate a reduction in the region’s key rate. On this subject, President Lagarde suggested a possible approach at some point during the summer.

Although inflation exceeds the target set by the European Central Bank, European policymakers appear inclined to maintain a cautious approach, even if the region’s weak economic fundamentals limit any potential for strengthening the euro.

Short-term technical outlook for EUR/USD

If the euro continues to fall against the US dollar and breaks the 2024 low at 1.0821 (January 23), it could approach the 100-day moving average at 1.0771 ahead of the December low 2023 at 1.0723 (December 8). The break of this level should not see notable support before the weekly low at 1.0495 (October 13, 2023), before the October 2023 low at 1.0448 (October 3) and the round number of 1.0400.

EUR/USD daily chart

euro ECB rate January 23, 2024
Source: FXStreet

The outlook for the EUR/USD pair is expected to turn negative if it rises above the 200-day moving average , now at 1.0844, sustainably. On the positive side, the spot needs to leave behind the weekly high of 1.0998 (January 11) to open the door for a likely visit to the December high of 1.1139 (December 28).

Looking at the 4-hour chart, the EUR/USD pair appears to have moved below the consolidation phase. That said, the first support level will be around 1.0821 before 1.0723. Bullish attempts, on the other hand, should look for a test of the SMA-200 moving average at 1.0920, followed by the SMA-100 moving average at 1.0930 and then at 1.0998. The MACD remains slightly in the negative zone, while the RSI has rebounded above 35.

By Pablo Piovano, FXStreet

Pablo Piovano, European Economist and Editor-in-Chief, joined FXStreet in 2011 after working on and managing asset allocation and investment research teams for a number of South American financial institutions.

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The opinions expressed here are solely those of the author and do not necessarily reflect the views of Forex Québec. Every investment and trading move carries risk, you should do your own research when making a decision.

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