EUR/USD Price Analysis – April 15, 2024
Daily Price Outlook
Despite the bullish US dollar and the ECB's consideration of lowering policy rates, the EUR/USD currency pair regained traction and attracted strong bids around the $1.0665 level. However, this movement could be attributed to the upcoming data releases, including seasonally adjusted Eurozone Industrial Production data and US Retail Sales figures on Monday. Conversely, the upticks in the EUR/USD pair could lose some momentum as the US Dollar (USD) strengthened from increased dollar-buying amid geopolitical turmoil, leading to downward pressure on the EUR/USD pair.
On the other hand, the ECB hinted at possible rate cuts due to slowing inflation, contrasting with the Fed's different monetary policy outlook. This divergence in policy direction contributed to the weakening of the euro against the US dollar.
Fed's Easing Plans and USD Strength Impacting EUR/USD Pair
On the US front, the broad-based strength of the US dollar, coupled with solid inflation and economic data, is causing the Fed to reconsider its easing plans. The probability of no rate changes in June has increased to 63.5% from 46.8% last week, according to the CME FedWatch Tool.
Investors are closely monitoring Eurozone Industrial Production and US Retail Sales data on Monday. Boston Fed President Susan Collins anticipates approximately two rate cuts this year, while also expressing hope for lower inflation later on.
Consequently, the higher probability of no rate changes in the US has bolstered the US dollar, exerting downward pressure on the EUR/USD pair as investors anticipate a more stable interest rate environment.
Geopolitical Tensions and Potential USD Fluctuations
On the geopolitical front, Iran responded to a suspected Israeli attack by launching drones and missiles at Israel over the weekend. Despite this, markets remained calm, possibly because Iran had given advance notice of the attack, reducing fears of a major escalation. Officials from Turkey, Jordan, and Iraq confirmed that Iran had warned them days before the attack, aiming to prevent casualties. However, a US official disputed this. President Joe Biden assured Israel that the US would not participate in any retaliatory actions, contributing to stability despite the tense situation.
Therefore, the geopolitical tensions between Iran and Israel, despite Iran's advance warning of its retaliatory actions, could cause temporary fluctuations in the US dollar as investors assess the broader impact on global stability, influencing movements in the EUR/USD pair.
Monetary Policy Divergence and EUR/USD Downward Pressure
On the Euro front, the EUR/USD pair faced downward pressure due to diverging views on monetary policy between the European Central Bank (ECB) and the Federal Reserve (Fed). The ECB hinted at potential rate cuts in June if inflation stays sluggish as forecasted. This difference in policy outlooks led to a weaker euro against the dollar.
Hence, the contrasting monetary policy outlooks between the ECB, considering rate cuts in June, and the Fed could strengthen the US dollar against the euro, potentially exerting downward pressure on the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair exhibited modest strength on April 15, marking an uptick of 0.17%, closing at 1.06555. The currency pair is currently testing an important technical threshold, positioned at a pivot point of 1.0630. Surpassing this pivot may prompt a push towards the immediate resistance level at 1.0685, followed by additional ceilings at 1.0726 and 1.0787. These levels will serve as critical markers for potential upward price action in the near term.
Conversely, should the EUR/USD retreat from its current position, it will find initial support at 1.0600. Further declines could see the pair testing subsequent support levels at 1.0571 and 1.0528, which may stabilize declines or mark new lows. Notably, the Relative Strength Index (RSI) at 27 suggests that the pair is currently oversold, which could indicate a forthcoming bullish correction if it sustains above the pivot point.
The 50-day Exponential Moving Average (EMA) stands at 1.08, hinting at a bearish trend overall but offering a distant target for potential bullish momentum. Traders might consider a buying strategy above the pivot point of 1.06329, with an advised take profit at 1.07040 and a stop loss set at 1.05969 to manage risk effectively.
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