The EURUSD currency pair declined in value during yesterday's trading session, hitting a new low and breaking through the dynamic support line established by the 50-period Moving Average. This drop in price may be attributed to the recent news that the US economy expanded by 3.2% annually in the fourth quarter, as well as strong consumer spending, according to a report released by the Bureau of Economic Analysis on Wednesday. Traders are expected to closely monitor the currency pair in light of the forthcoming release of significant economic data that could impact currency valuations.
Overview
The EURUSD currency pair declined in value during yesterday's trading session, hitting a new low and breaking through the dynamic support line established by the 50-period Moving Average. This drop in price may be attributed to the recent news that the US economy expanded by 3.2% annually in the fourth quarter, as well as strong consumer spending, according to a report released by the Bureau of Economic Analysis on Wednesday. Traders are expected to closely monitor the currency pair in light of the forthcoming release of significant economic data that could impact currency valuations.
Upcoming Economic Events
Friday 3:00 pm (GMT): ISM Manufacturing PMI
Technical Analysis
The EURUSD has been on a downward trajectory since December 28 last year. The exchange rate hit a low price of 1.06945 on February 14, which prompted the bulls to enter the market with long positions. As a result, the exchange rate increased, and a corrective rally began. On February 20, the prices managed to close above the peak of 1.08058, which formed an upside reversal, known as a non-failure swing in technical analysis. More specifically, the trough of 1,06945 fell below the previous trough at 1.07225. Subsequently, the exchange rate exceeded the last peak at 1.08058. The bullish outlook is supported by the Momentum Oscillator, which is hovering above its baseline while the prices fluctuate up and down the 50-period Moving Average.
Potential Upside Targets
Should the current upward momentum persist, it is possible to calculate the following price targets:
1.08746: The first price objective is calculated at 1.08746, representing the 161.8% Fibonacci extension linked to the non-failure swing, formed by the peak at 1.08058 and the trough at 1.06945, respectively.
1.09325: The next resistance is seen at 1.09325, representing the high price marked on January 24.
1.09859: The third price target is estimated at 1.09859, which corresponds to the 261.8% Fibonacci extension of the non-failure swing.
1.11396: Finally, the fourth target aligns with the highest price reached on December 28.
Fundamentals
In February, the eurozone's largest economy continued to decline, according to the latest survey by S&P Global. The drop in business activity has been going on since the middle of last year, and it seems to be getting worse. This is mainly due to a sharp reduction in manufacturing output, which means that fewer goods are being produced. Demand for goods and services has also decreased.
Moreover, the US economy grew by 3.2% between October and December last year, according to a report published by the Commerce Department. This growth was largely due to consumers spending more money, which helped the economy to get stronger.
Conclusion and Considerations
In conclusion, the EURUSD is looking for direction in light of the Purchasing Managers' Index, which is due to be released this afternoon. Hence, exercising caution and implementing effective risk management strategies when operating in the financial markets is essential. Additionally, staying abreast of economic events and geopolitical developments is crucial to making informed trading decisions.