Daily Price Outlook
The EUR/USD pair has bounced back strongly, forming a V-shaped recovery after finding support above 1.0700 in the European session. The recovery is mainly driven by a notable decline in the US Dollar, which keeps the EUR/USD currency pair higher.
Investors are uncertain about the possibility of another interest rate hike by the Federal Reserve (Fed), which has restricted the upward movement of the USD.
As of now, the EUR/USD pair is trading at 1.0719 and is consolidating within the range of 1.0669 to 1.0720.
Cautious Investor Sentiment and Positive Market Mood
The global market sentiment has been flashing mixed signals as investors are adopting a cautious stance ahead of Fed’s Monetary Policy decision. It is worth mentioning that the probability of the Fed announcing a pause in its interest rate policy is increasing, with over 73% chance.
This is mainly driven by the poor economic prospects of the United States, as indicated by seven consecutive monthly contractions in factory activity and challenges faced by the service sector.
This news has contributed to the EUR/USD pair’s strength and its ability to rebound, as investors anticipate a potentially more dovish stance from the Fed, favoring the euro over the US dollar.
Eurozone Economic Turmoil and Mixed German Industrial Figures
On the negative side, the Eurozone is facing economic challenges, resulting in credit rating downgrades. Germany, the largest economy in the Eurozone, is currently in a recession with declining Gross Domestic Product (GDP) over the past two quarters and slow factory activity.
Thus, the combination of weak economic performance and high inflation poses difficulties for the entire region, which was seen as a key factor that kept the lid on any additional gains in the EUR/USD pair.
In a positive development, recent data highlights a potential recovery in Germany’s manufacturing sector through a notable increase in industrial production. In April, industrial output rose by 0.3% compared to the previous month, exceeding market expectations.
This positive development brings hope and optimism to Germany’s manufacturing industry, suggesting a favorable trend in its overall economic performance.
As market sentiment responds positively to this improving economic outlook in Germany, it could potentially lead to further gains in the EUR/USD pair.
EUR/USD Price Chart – Source: Tradingview
EUR/USD – Technical Outlook
The EUR/USD pair initiated today’s trading session with a distinct bearish sentiment, breaking the previously established intraday bullish trend line. As a result, market focus shifts towards an anticipated decline, with an initial target set at 1.0745.
It is crucial for traders to closely observe the price action at this level, as a breach below it could prolong the bearish momentum, potentially leading to a test of the 1.0630 region, which serves as the next significant support zone.
Today’s trading outlook maintains a bearish bias, supported by the pair trading below the EMA50. However, if the EUR/USD manages to surpass the 1.0870 level, it could halt the negative scenario and facilitate a resumption of the primary bullish wave.
Traders should anticipate a trading range between the support level at 1.0730 and the resistance level at 1.0875 for today’s session. Overall, the expected trend for today remains bearish.
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