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EUR/USD Tests 1.0800 as Fed, ECB Take Center Stage

Published 01/31/2023, 09:26 AM
Updated 07/09/2023, 06:32 AM

The EUR/USD pair trades slightly lower for a fourth consecutive day on Tuesday despite growth data from the Eurozone coming better than expected as market sentiment remains cautious ahead of the central banks' meetings this week.

At the time of writing, the EUR/USD pair is trading at the 1.0835 level, 0.12% below its opening price, bouncing from a two-week low of 1.0802 earlier on the day. Meanwhile, the dollar, measured by the DXY index, continues to outperform its rivals, recording a four-day winning streak at the 102.40 zone.

The Eurozone economy grew by 0.1% in the last quarter of 2022, slightly above the expectations of stagnation and decelerating from the previous reading of 0.3% in Q3, according to Gross Domestic Product (GDP) figures released by Eurostat in a preliminary on Tuesday. Yearly, the block's GDP increased by 1.9% in the fourth quarter, compared to the 2.3% growth in Q3, surpassing the 1.8% expected growth rate.

In addition, the Federal Statistics Office of Germany released December Retail Sales data, which showed an annual decrease of 6.4% versus the 4.3% fall expected.

Investors' attention remains on the Federal Reserve decision (Wednesday) and the European Central Bank (ECB) announcement on monetary policy (Thursday). While the former is expected to hike by 25 bps, the latter raises the main rates by 50 bps. Against this backdrop, the dollar is benefiting from the jitters ahead of the meetings.

EURUSD Daily Chart

From a technical standpoint, the EUR/USD maintains a bullish short-term bias despite the current pullback, which for now, is seen as merely corrective. Indicators on the daily chart remain in positive territory, although they have turned mostly flat, while the price hovers just above the 20-day Simple Moving Average (SMA).

The immediate support levels are seen at the 1.0800-1.0790 zone, where the 20-day SMA reinforces the psychological level, followed by the mid-January lows at the 1.0720 region. On the other hand, the next resistance level stands at the nine-month peak of 1.0929, followed by the 1.1000 psychological area.

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