Euro Q4 Technical Prediction: Risk Ratio Leans Downward

For most of the third quarter, the EUR/USD pair’s price movement remained mediocre, at least up till the time of publishing this article. Volatility was quite moderate during the day, with the pair trading within a range of approximately 250 pips for the bulk of the session, as indicated on the daily chart. The failure of major changes in the market is attributed to the seasonal pattern, which is characterized by lower amounts and fewer financial transactions during the summer months.

Notwithstanding the market’s sluggishness, the EUR/USD was just marginally weaker on Tuesday morning. During the quarterly review, it continued to trade within the confines of a medium-term falling range and made lower highs than during the previous quarter, both of which were negative signals at the time of writing. On the daily chart, it was in late July that a “death cross” appeared, which signaled the beginning of doom. A death cross, which occurs when the 50-day simple moving average (SMA) protrudes beyond the 200-day SMA from high to low, is viewed as a sign of instability and, in many cases, predicts the beginning of significant losses for the underlying financial instrument.

Review Of The Technicalities

EUR/USD CHART. Source:  Tradingview.com

The Relative Strength Index (RSI) on the four-hour chart is barely below 30, indicating that the market is oversold. That suggests that a rebound is on the horizon, though it may be brief. The Euro/Dollar is reeling from a considerable negative trend and is trading far below the 50, 100, and 200 Simple Moving Averages, among other key moving averages.  Support can be found at the new 2021 low of 1.1560, backed by 1.1510 and 1.1450, which are all important resistance levels.  On Thursday, a recovery effort was halted around 1.1610, which is where some opposition exists. Further up, the levels of 1.1660 and 1.1680 are expected.

Outline Of The Fundamentals

Although the EUR/USD has rebounded from its recent lows, there are compelling grounds to believe that this recovery will be short-lived in the long run. Profit-taking on Dollar-long positions, as well as the expectation that European inflation numbers will rise to the occasion, are likely to be the driving forces for the modest increase. Compared to August, it is projected that the initial Consumer Price Index (CPI) for September will show an increase of 3.3 percent on an annual basis, up from a decline of 3 percent in August.

This might lead to the European Central Bank (ECB) reducing its bond holdings, which would result in the Euro rising against the Dollar. The rising cost of energy resources is one of the causes contributing to the rise in European inflation, which has the potential to choke the recovery from the pandemic. A government shutdown was avoided at the last minute in the United States, but the clock is still ticking down to the debt ceiling, which could be reached in as little as two weeks if the current course of events continues.

Meanwhile, intra-Democratic party squabbling is having a negative influence on morale and driving up the value of the safe-haven Greenback as a result of the global financial crisis. According to the Federal Reserve’s preferred gauge of inflation, the Core Personal Consumption Expenditure (Core PCE), the rate of inflation is likely to moderate in the following months. As a result of the Federal Reserve’s tightening stance, the value of the Dollar has risen.