EUR/USD Forecast: Caution keeping the pair range-bound

EUR/USD Current Price: 1.0555

• Upbeat Chinese macroeconomic data partially offset concerns about Middle East developments.
• United States Treasury bond yields stand near multi-year highs while stocks ease.
• EUR/USD retreats after another failed attempt to reconquer the 1.0600 mark.

The EUR/USD pair trades around 1.0550 early in the American session, easing for a second consecutive day from the 1.0590 price zone. Escalating tensions in the Middle East weigh down the market sentiment and limit demand for the high-yielding Euro. United States (US) President Joe Biden arrived in Israel early on Wednesday, a brief visit to support the country on its war with Hamas, yet also look for a diplomatic solution. Meanwhile, Iran Foreign Minister Hossein Amir-Abdollahian called for an oil embargo against Israel and warned about “preemptive” actions against the Zionist regime in the coming hours.

Chinese macroeconomic figures released at the beginning of the day partially offset the negative mood. The country reported that the Q3 Gross Domestic Product (GDP) was up  1.3%, improving from 0.5% in the previous quarter. Industrial Production rose at an annualized pace of 4.5% in September, while Retail Sales in the same period increased by 5.5%, beating the market expectations.

Meanwhile, the US Dollar lacks momentum. It could be partially explained by weaker government bond yields, although Treasury yields hover near multi-year highs. The 10-year note currently offers 4.83%, while the 2-year note pays 5.19%. Stock markets, in the meantime, trade mainly in the red, with Wall Street’s indexes aiming to kick-start the day with modest losses.

Data-wise, the Euro Zone confirmed the September Harmonized Index of Consumer Prices (HICP) at 4.3% YoY in September, while Construction Output fell 1.1% MoM in August. Across the pond, the US published MBA Mortgage Applications, down 6.9% in the week ended October 13. Also, Building Permits were down 4.4% in September, while Housing Starts were up 7% in the same month. Several Federal Reserve (Fed) speakers will be on the wires during the American session, but their words seem unlikely to trigger relevant market movements.

EUR/USD short-term technical outlook

From a technical point of view, the EUR/USD pair daily chart shows it trades around its opening, holding a handful of pips above a firmly bearish 20 Simple Moving Average (SMA). The longer moving averages remain directionless, roughly 300 pips above the current level. Finally, technical indicators stand within neutral levels, the Momentum turning lower and the Relative Strength Index (RSI) consolidating around 45, skewing the risk to the downside.

The downside seems limited in the near term, according to the 4-hour chart. EUR/USD met buyers around converging 20 and 100 SMAs at 1.0545, while the 200 SMA maintains its downward slope well above the current level. Meanwhile, technical indicators hold within positive levels but turned sharply lower, reflecting strong selling interest ahead of the 1.0600 threshold.

• Support levels: 1.0545 1.0495 1.0450  
• Resistance levels: 1.0595 1.0640 1.0685

- Pipscollector -