EUR/USD Daily Chart Analysis – 2024-02-13

Technically, EUR/USD is showing signs of consolidation with the price action confined within a descending channel, indicating a short-term downtrend within a larger range. The pair has recently tested the lower bound of the channel, suggesting potential support around the 1.0767 area, with a rebound towards the upper channel line. The presence of Fibonacci retracement levels signifies areas of interest where traders might expect resistance or support. Notably, the RSI is hovering near the midline, signaling neither overbought nor oversold conditions, which aligns with the market’s current state of equilibrium and indecision.

Fundamental Analysis: Fundamentally, the pair’s movement is being influenced by the interplay of U.S. Treasury yields and shifts in risk sentiment. Rising U.S. yields have historically bolstered the dollar; however, an improvement in risk sentiment, as indicated by softer yields and a rallying U.S. stock market, has provided support for the euro. Additionally, economic sentiment indicators from Germany, such as the ZEW survey, and forthcoming U.S. inflation data are set to shape the direction of the currency pair, with significant implications for the Federal Reserve’s policy outlook.

Overall Market Sentiment: The current market sentiment for EUR/USD is a blend of cautiousness and expectancy:

• 45% Neutral: Reflecting the indecision shown by the daily and monthly doji candlesticks and the midline RSI, suggesting a balanced tug-of-war between bulls and bears.
• 30% Positive: Driven by the improved risk sentiment and the euro finding buyers on dips, indicating underlying support for the currency pair.
• 25% Negative: Owing to the pressure from rising U.S. yields, which could strengthen the dollar and lead to a bearish scenario for EUR/USD.

This sentiment distribution acknowledges the market’s wait-and-see approach ahead of pivotal economic data releases, with a slight lean towards a positive outlook given the recent recovery from the lower channel bound and improving risk appetite. The negative component considers the potential impact of strong U.S. inflation data, which could reinforce a hawkish Fed policy and weigh on the euro.