The Euro is currently lagging behind the Pound in a cautious market. It is approaching the support level at 0.8600, even with positive data on German industrial production and a drop in retail consumption across the Eurozone. The Pound has gained strength after Rachel Reeves was confirmed as the UK chancellor, though worries about the UK’s fiscal deficit remain. The Euro’s recent high of 0.8645 indicates a potential end to its recent upward trend, and it needs to drop below 0.8600 for a correction to be confirmed.

4-hour RSI Indicator

If the Euro continues to decline, it could push the 4-Hour RSI below 50, marking the completion of a 5-Wave upward cycle. The next support levels to watch are 0.8550 and 0.8515, which align with Fibonacci retracement levels. On the positive side, if the Euro breaks above 0.8670, the focus could shift towards the high of 0.8740. The Euro serves 19 EU countries and made up 31% of currency transactions in 2022, with a daily turnover of over $2.2 trillion. The European Central Bank sets monetary policy and interest rates for the Eurozone. Various factors, including inflation, GDP, and trade balance, strongly impact the Euro’s value.

Impact of Economic Indicators

Recent German industrial output has exceeded expectations, which normally supports the Euro, but this has been offset by weak retail figures across the Eurozone. This discrepancy has made investors hesitant to sustain any upward trend, especially since the Pound gained clarity after Reeves’ appointment, boosting Sterling despite ongoing fiscal worries. The recent high at 0.8645 acts as a temporary ceiling, and trading below this level suggests renewed downward pressure. If the rate falls below 0.8600, it could indicate the beginning of a more prolonged pullback. The idea is simple: if a prior upward wave fails to create a new high and breaks below a key level, that signals a loss of momentum. This is why the 0.8600 area is important. From a momentum angle, the RSI on the 4-hour chart is being closely monitored. A drop below 50 would suggest that the upward cycle has ended, indicating that sellers may be gaining control. Support targets would then be 0.8550 and 0.8515, which are significant levels based on previous demand and Fibonacci analysis; these could trigger a temporary halt or reversal in selling. However, a strong daily close above 0.8670 would challenge the current bearish outlook. This could bring the previous high at 0.8740 within reach, potentially leading to a shift toward a more neutral or even bullish scenario. Yet, without a strong catalyst—such as changes in interest rate expectations or surprising economic data—we’re not betting on this happening soon. We also need to consider the bigger picture. The Euro isn’t just a local currency; it’s part of a complex financial system managed by the European Central Bank. Its movements are influenced not only by domestic economic data but also by guidance from policymakers, particularly regarding interest rates. This makes every inflation report, GDP update, and trade figure highly relevant for the Euro’s medium-term movements. During times like this, when data is mixed and sentiment is cautious, we prefer to adopt shorter trading strategies. Short-term options or tight stop-loss trades provide more flexibility while the market decides whether this downturn will continue. Any effort to reclaim previous highs will require both stronger fundamentals and better overall risk sentiment, which we currently don’t observe. Until then, our strategies lean towards selling rallies, while we closely monitor upcoming Eurozone CPI and any UK budget news that could sway sentiment in either direction. Create your live VT Markets account and start trading now.

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