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EUR/USD, Oil Forecast: Two trades to watch

Article By: ,  Senior Market Analyst
February 23, 2024 9:01 AM

EUR/USD is set for a weekly gains; German data is in focus

  • German IFO business sentiment to rise to 85.5 from 85.2
  • US jobless claims & hawkish Fed comments support the USD
  • EUR/USD struggles at 200 SMA

EUR/USD is heading higher for an eighth straight session and is looking to book modest gains across the week after five consecutive weeks of declines.

Attention is on German data, with Q4 GDP figures expected to confirm the earlier reading of 0.3% quarter on quarter. However, given that this is the final reading, it's not likely to be that market moving.

German Ifo business sentiment will also be released and is expected to show a very slight improvement in the business climate in February, ticking up to 85.5, up from 85.2. However, unless the survey shows a meaningful move higher, the euro is unlikely to get a big boost.

The data comes after German PMI figures yesterday, which showed that the downturn in the manufacturing sector unexpectedly deepened in February, with activity declining at a faster pace due to falling demand both domestically and abroad. The PMI drops to 42.3 from 45.5 the previous month. However, the overall business activity slipped to 46.1 from 47, thanks to some recovery in the service sector.

The report highlights ongoing concerns about Germany’s economic performance, with forecasts slashed this week for 2024 to just 0.2% growth, down from 1.3% and after construction in 2023.

Meanwhile, the US dollar is slipping lower, but losses could be limited after hawkish comments from Federal Reserve officials and after stronger-than-expected US jobless claims. Jobless claims fell to a monthly low of 201K, down from 212K. There is no high-impacting US data today. Investors will look ahead to core PC figures next week as the next major catalyst.

EUR/USD forecast – technical analysis

EUR/USD has risen across the week after five straightly weekly declines. The pair still struggles to book a close above the 200 SMA at 1.0830. A meaningful rise above this indicator could pave the way for a rally towards 1.0880, the weekly high, and on to 1.10, the psychological level.

On the downside, rejection at the 200 SMA could see the price falling back into the descending channel and looking to support at 1.0725, the December low, ahead of 1.07, the 2024 low.

Oil is on track for a weekly loss on worries of high rates for longer

  • High rates for longer could hurt the oil demand outlook
  • Inventories fall by less than expected
  • Oil trades in a rising channel

Oil prices are inching lower on the day and are set to fall across the week after two straight weeks of gains.

The dip in oil prices comes as the US central bank reiterated remarks that interest rates could remain high for a few more months. Fed governor Christopher Waller said that the Federal Reserve should delay any move on rates to see whether a recent uptick in inflation is the start of a new trend or just a bump in the road.

High rates for longer could slow economic growth and the oil demand outlook in the US, the world’s largest oil consumer.

Meanwhile, crude oil inventories rose at a less-than-expected rate, offering some support to the price.

Meanwhile, any losses in oil are likely to be limited amid the ongoing hostilities in the Red Sea between, as he says, the proper tax near Yemen.

Oil forecast – technical analysis

Oil trades within a rising channel dating back to the end of last year. More recently, the price has extended its rally from 71.40, the February low, rising above the 200 SMA as it retests resistance around 78.00, last week’s high. The RSI supports further upside.

Buyers will look to rise above 78.00 and 79.30, the 2024 high, to extend gains towards 81.50, the October 2023 low.

On the flipside, immediate support is at the 200 SMA at 77.50, with a break below here opening the door to 76.00, the 20 SMA, and 75.00.

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