EUR/USD at 1.07 with Powell's speech?

19 oct 2023

The EUR/USD is trading below 1.0550 in the early European session on Thursday, primarily due to ongoing tensions in the Middle East, which are bolstering the safe-haven US Dollar. Investors are cautious ahead of a speech by Fed Chair Powell. The EUR/USD briefly touched 1.0595 but then retreated, forming a short-term double-top pattern. A drop below 1.0560 confirmed this pattern, setting a target of 1.0530 and suggesting the pair may have peaked in the short term. If it falls below 1.0520, the Euro could face further weakness with support at 1.0500. On the positive side, the pair needs to surpass 1.0565 to attempt a breakthrough of the critical resistance at 1.0595, potentially aiming for 1.0630. On Wednesday, the EUR/USD fell below the 20-day Simple Moving Average (SMA) after encountering resistance at 1.0600, driven by a strengthening US Dollar due to worsening market sentiment and higher Treasury yields. Initially, positive Chinese economic growth data boosted market sentiment, but geopolitical concerns quickly took precedence, impacting risk sentiment and favoring the US Dollar. Simultaneously, rising Treasury yields further supported the Greenback, with the 10-year Treasury yield hitting its highest level since 2007 at 4.92%. Upcoming data releases include US Jobless Claims and the Philly Fed index, with a speech from Federal Reserve Chair Powell at the Economics Club of New York. The EUR/USD is currently in a consolidation phase within a prevailing bearish trend, as fundamental factors continue to favor the US Dollar, limiting upside potential and maintaining a downside bias for the pair. Additionally, the price is in a significant demand zone, along with an upward trendline that may test at the level of 1.0523 before going long with a target of 1.07. I personally will look for some liquidity spikes during the London session to enter a long position. Let me know your thoughts. Happy trading to all from Nicola, the CEO of Forex48 Trading Academy.