EUR/USD forecast: bearish signal as a death cross nears

September 14, 2023 11:44 PM AEST | By Invezz

EUR/USD forecast: bearish signal as a death cross nears — Image source: Invezz

ECB decision, US retail sales numbers

The EUR/USD pair retreated as investors reacted to three key events. First, the European Central Bank decided to hike interest rates by 0.25%. It pushed them to 4%, the highest level since the bank was established.

The ECB cited the fact that European’s inflation remained stubbornly high. As such, the rate was warranted as it seeks to bring it to the important target of 2.0%.

Still, some analysts are concerned about the impact of these rate hikes to the European economy. Recent numbers by the ECB showed that money supply and liquidity in the region had dropped to the lowest level in years.

At the same time, several economies, including Germany, have contracted in the first two quarters of the year. These hikes will likey lead to more weakness in the coming months.

The EUR/USD pair also rose after the strong US retail sales numbers. Sales jumped by 0.6% in August while core sales rose by 0.6%. These numbers mean that consumer spending is still strong even as inflation remains high. As I wrote in this article, the country’s inflation jumped to 3.7% in August.

Third, the pair dropped as investors reacted to the soaring crude oil price. Brent has jumped to $93 while WTI rose to $90. Therefore, there is a likelihood that the Fed will also hike rates next week.

There are two key risks to the American economy. First, the UAW has threatened to go to a strike that analysts believe will go on for weeks. This strike will have an impact on the American economy because of the role that the auto sector plays.

Second, millions of Americans will restart paying back their student debt, which could hit their purchasing power.

EUR/USD forecast

EUR/USD chart by TradingView

The daily chart shows that the EUR/USD pair outlook is darkening. It has already moved below the lower side of the red ascending channel. Most importantly, it has crossed the 50-day and 200-day moving averages. The two are about to make a death cross, which is one of the most accurate bearish signs.

Therefore, the outlook for the pair is bearish, with the next level to watch being at 1.0500, the lowest level on March 15th.

The post EUR/USD forecast: bearish signal as a death cross nears appeared first on Invezz.

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