EUR/USD Threatens Critical Support
Alex Boltyan | Aug 18, 2022 03:42PM ET
The EUR/USD pair fell sharply on Thursday amid broad-based dollar strength, which sent the euro to its lowest level in a month during the New York session.
At the time of writing, the currency pair is trading at the 1.0085 area, recording a 0.9% daily loss after touching a one-month low at 1.0079.
Following a phase of sideways trading, the US dollar picked up steam and rallied across the board despite lower US yields amid a mixed market mood.
On Wednesday, the minutes of July's FOMC meeting showed some members believe the policy rate should remain at a "sufficiently restrictive level" for some time to ensure the inflation rate returns to the 2% target. The Fed didn't provide specific guidance for the next meetings, reaffirming that decisions would remain data-dependent. However, the minutes showed many participants were worried about over-tightening, which temporarily weighed on the greenback.
On the data front, U.S. Initial Jobless Claims for the week that ended August 12 eased to 250,000 from 252,000 the previous week and below the 265,000 expected. On the other hand, July's Existing Home Sales reaffirmed a slowdown of the housing markets as they decreased to 4.81M, posting the sixth monthly decline in a row.
Across the pond, the EU published its final estimates of July's inflation figures, which came in line with expectations. Headline CPI inflation rate was 8.9% YoY, while the core reading stood at 4%.
From a technical perspective, the EUR/USD holds a short-term bearish bias according to indicators on the daily chart, while the price prints a bearish engulfing candle below the 20-day SMA. The RSI holds a negative slope below its midline, while the MACD made a bearish cross.
A break below the 1.0080 area would expose a retest of the parity level and potentially the cycle low of July 14 at 0.9952. On the other hand, the 20-day SMA, currently at 1.0202, is the first resistance for the bulls to regain. A recovery of this level could allow a rise toward the 1.0250 and 1.0300 areas.
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