EUR/USD Technical Analysis: Heading Towards Oversold Levels
The EUR/USD currency pair had the share of that decline to the 1.0616 support level, the lowest for the currency pair in five weeks.
In this regard, the Ifo Institute said that the monthly confidence index rose to a reading of 91.1 points in February from a reading of 90.1 in the previous month. This was due to a clear improvement in the companies’ outlook for the next six months, as their assessment of the situation has now worsened slightly.
The poll showed an increase in confidence since November, but it is much lower than its level of 98.6 last February, before Russia began its comprehensive invasion of Ukraine.
“The German economy is gradually making its way out of a period of weakness,” Ifo said in an exclusive statement. Europe’s largest economy contracted 0.2% in the fourth quarter of last year compared to the previous three-month period, largely due to lower consumer spending.
The Ifo poll is based on responses from nearly 9,000 companies in a wide range of sectors.
For his part, Timo Klein, chief economist at S&P Global Market Intelligence in Frankfurt, said in a research paper that the fact that the improved outlook is still based solely on future expectations reinforces the view that “the German economy will only begin to recover during the second quarter.” He added that “However, the broad-based nature of the improvement in expectations across all relevant sectors confirms that economic activity will indeed pick up soon, thanks to reduced concerns about energy security and prices.”
Inflation has suffered in Germany in recent months as it has in other countries. The Federal Statistical Office said yesterday that the annual inflation rate rebounded to 8.7% in January after falling to 8.1% in December, as a result of the state shouldering the cost of monthly bills to natural gas customers in December as part of the government’s massive energy relief. The aim was to ease the pain of natural gas prices, which had soared after the invasion of Ukraine and the end of Russian gas supplies to Germany. However, the alarming shortage of gas used for heating homes, electricity generation and the power industry was not realized. Germany’s gas storage facilities are well-equipped, and the country has opened its first LNG terminals.
The bearish trend of the EUR/USD currency pair is getting stronger, and it is the closest to breaching the next psychological support 1.0600, and stability below it may push the bears to move towards stronger descending levels. From now until reaching it, it seems clear that the technical indicators have reached oversold levels, but the continued strength of the dollar means the continuation of the current trend.
On the other hand, over the same period of time, the movement of the euro/dollar toward the resistance level at 1.0820 will be important for the bulls to control the trend again. Bearing in mind that the continuation of the momentum for the future of raising US interest rates will threaten any attempts of the currency pair to rebound upwards. Today, the euro/dollar currency pair will be affected by the announcement of inflation figures in the eurozone, as well as the announcement of the US economic growth rate and the US weekly jobless claims.