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Summary: The EURUSD exchange rate exhibited narrow fluctuations below 1.0700 during the Asian session but experienced a slight decline in the early European session. Despite Fed Chairman Powell's assertive statements, the US dollar held its ground, lacking traction in the asset.

Fundamentals

In the New York session on Friday, the EURUSD faced bearish pressure an fell below 1.0700. Earlier on Friday, the asset remained relatively calm, with technical prospects indicating a neutral performance.

Fed Chairman Powell reaffirmed the data-dependent approach during Thursday's participation in the International Monetary Fund's (IMF) monetary policy panel. Powell stated, "We are making decisions meeting by meeting based on the totality of the incoming data and their implications for the outlook for economic activity and inflation."

However, Powell noted a lack of confidence in their ability to achieve a policy stance that would gradually bring the inflation rate down to the 2% target over time. This commentary boosted the US dollar, leading to a decline in the EURUSD.

Former European Central Bank President and former Italian Prime Minister Mario Draghi expressed a "very pessimistic" outlook for the future economic growth of the European Union, predicting a recession by the end of this year, in stark contrast to the International Monetary Fund's forecasts.

As Draghi warned about the future of the Eurozone, he emphasized the crucial need for "political integration." He stated, "It is almost sure we are going to have a recession by the year-end. It is quite clear the first two quarters of next year will show that."

At the time of Draghi's warning, preliminary estimates released by Eurostat last week indicated a 0.1% contraction in the Eurozone economy on a month-on-month basis for the three months ending in September. Many economists expect a further contraction in the fourth quarter.

However, the latest forecast from the European Central Bank suggests a rebound in the Eurozone economy with a 0.1% month-on-month growth in the final three months of this year, rising to 0.3% in the first quarter of 2024 and continuing to recover to 0.4% in the second quarter. The IMF predicts a slight rebound in the overall European economic growth from 1.3% this year to 1.5% next year.

Draghi noted that a relatively low unemployment rate could mitigate the impact of the anticipated recession on the European economy. Earlier this year, the Eurozone unemployment rate reached a historic low of 6.4%, but it slightly increased in September.

In summary, Draghi concluded, "The starting point of this recession is pretty high—we never had such low unemployment. So we may have a recession, but maybe it is not going to be destabilizing."

Technical Analysis

The intraday bias for the EURUSD remains neutral. The Relative Strength Index (RSI) in the 4-hour chart has retreated below 50, and the price has fallen below the midpoint of the ascending regression channel, indicating a bearish tilt in the short-term outlook. Keeping an eye on the 4-hour chart's 55 EMA (currently at 1.0657) is recommended. As long as this moving average holds, further upside potential remains favorable.

A decisive break above the 1.0764 resistance level by the bulls would extend the next upward movement from 1.0447 to the 61.8% Fibonacci retracement level at 1.0958. However, a sustained drop below the 55 EMA in the 4-hour chart suggests that the rebound from last Friday's non-farm payroll situation has concluded. The bearish target range includes the 1.0515 support level, followed by the 1.0447 low.

From a larger time frame perspective, the bullish trend persists, as the RSI, despite a slight decline, remains well above the 50-neutral threshold. However, any further upward movement may be short-lived, as the stochastic oscillator seems to have peaked in the overbought zone above 80.

Overall, the EURUSD may still find support in the short term, but the potential for improvement could be limited before the next bearish cycle. In terms of trading strategy, it is recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 1.0735

Target Price: 1.0495

Stop Loss: 1.0792

Valid Until: 2023-11-24 23:55:00

Support: 1.0657, 1.0624, 1.0569

Resistance: 1.0725, 1.0739, 1.0756