Daily Technical Analysis EUR/USD The downtrend is strengthening


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EUR/USD hit the lowest level in a month and a half and reached 1.0730. The EUR/USD is likely to remain in this trend in expectation of a possible reaction that may be generated by the announcement of the US employment figures this week. Breaking the 1.0800 support level could enable bears to push EUR/USD towards the next, more significant support levels.

According to the economic calendar data, the US manufacturing PMI rose to a reading of 50.3 in March 2023, up from a reading of 47.8 in February and beating market estimates of 48.4. Clearly, this is a sign of the first manufacturing sector growth in 16 months of contraction.

U.S. construction spending contracted 0.3% in March, following a 0.2% decline in February, defying market expectations of a 0.7% increase. This is the second consecutive decline in construction spending, driven by a decrease in public construction spending (-1.2%). Likewise, private construction spending remained flat, with a 0.7% increase in residential construction offset by a 0.9% decline in nonresidential construction. Despite these monthly fluctuations, on an annual basis, construction spending saw a 10.7% increase in February.

The question on many people’s minds is whether the euro will rise in the coming days. In this regard, many market analysts see the EUR/USD pair reaching the psychological resistance level of 1.1000 on a monthly basis, although they expect a further decline to 1.0500 in 12 months’ time. There are also other analysts who see room for the euro to retreat against the dollar in the short term, due to recent comments made by the Federal Reserve. This week, the EUR/USD touched its lowest levels in five weeks, settling below the psychological level of 1.0800.

Regarding the Fed’s monetary policy, Chairman Powell took a strong stance in his remarks last Wednesday. According to Powell, the Fed needs at least two months of data indicating that inflation is moving towards the 2% target before considering a rate cut, emphasizing the need for continued support in the meantime.

He also said that there was no rush to cut interest rates, and the latest data points to fewer interest rate cuts this year, as data have generally not met expectations. As a result, markets now estimate a lower chance, from the previous 70%, that the Fed will cut interest rates in July’s monetary policy, around 65%.

Now, we await the pair’s reaction to the forthcoming data publication, as well as the Eurozone’s response, where a clear consensus on when to lower interest rates is still absent. This hesitation is because several European Central Bank executives lack full confidence in making the cuts, fearing a negative impact on the economy.

Daily technical analysis EUR/USD April 3rd

The steady momentum of the USD compared to other market heavy currencies in the shadow of the US Federal Reserve’s hawkish policy gives assurance that the bears can control the behavior of the EUR/USD pair. In technical terms, the move below the psychological support level of 1.0800 gives assurance to the bears of a possible further move in a downtrend. The next support levels of 1.0745 and 1.0670 may move the technical indicators towards oversold levels.

Ultimately, the EUR/USD pair will remain under bearish pressure most likely until the market along with the dollar reacts to the US employment data announcement at the end of the week.

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