Technical Analysis

EUR/USD Price Analysis – April 24, 2024

By LonghornFX Technical Analysis
Apr 24, 20243 min

Daily Price Outlook

Despite the upbeat German IFO survey and higher-than-expected preliminary Services PMI data in the Eurozone, the EUR/USD pair has been unable to extend its upward rally and turned bearish around 1.0688, hitting an intraday low of 1.0680. This decline can be attributed to various factors, including a bullish US dollar and a dovish stance by ECB policymakers. ECB officials expressing a united desire to cut the ECB’s base lending rate in June suggest a willingness to adopt accommodative monetary policies to stimulate economic growth or combat economic challenges.

Contrary to this, the ECB Governing Council member and Bundesbank President Joachim Nagel's hawkish comments suggest that he is not ready to commit to a path of rate cuts due to concerns about high services inflation and strong wage growth. This stance would likely strengthen the Euro and limit the downside of the EUR/USD pair. However, the hawkish stance, like the one taken by Joachim Nagel, indicates a preference for higher interest rates or caution against lowering them. This approach is generally supportive of a currency, as higher rates can attract more investment due to better returns.

Mixed Signals in Eurozone Economic Data: Implications for EUR/USD

On the data front, the German IFO Business Climate Index in April rose to 89.4, much higher than March's 87.9 and above the forecast of 88.9. The Current Economic Assessment Index also improved, reaching 88.9 compared to March's 88.1, surpassing expectations. Similarly, the IFO Expectations Index, reflecting business projections for the next six months, climbed to 89.9, up from 87.7.

Despite these positive indicators, the Eurozone's manufacturing PMIs for both France and Germany remained weak, signaling a continued contraction since June 2022. However, the services sector has been steadily improving, with France's index reaching 50.5 and Germany's jumping from 50.1 to 53.3. The eurozone-wide services PMI hit 52.9, its highest level since May 2023, suggesting resilience in this sector.

Therefore, the positive German IFO data strengthen the Euro (EUR) against the US Dollar (USD) as it indicates improved economic conditions. However, weak manufacturing PMIs could temper gains, while a resilient services sector may offer support.

EUR/USD Price Chart - Source: Tradingview
EUR/USD Price Chart - Source: Tradingview

EUR/USD - Technical Analysis

The EUR/USD pair has seen a minimal increase today, rising by 0.01% to a current trading price of $1.07025. The pair is approaching its pivot point at $1.0711, which will likely determine the short-term directional bias.

Resistance for the EUR/USD is set at $1.0744, with further hurdles at $1.0778 and $1.0809. These levels must be breached to sustain any bullish momentum. On the flip side, support can be found at $1.0670, with additional support levels at $1.0635 and $1.0603, where buyers may step in to stall further declines.

The Relative Strength Index (RSI) is at 63, suggesting moderate bullish sentiment, though approaching overbought territory which may curb further gains. The 50-day Exponential Moving Average (EMA) stands at $1.0654, below the current price, indicating that the market has some room to adjust downward before encountering major resistance.

A doji candlestick formation has emerged near a downward trendline around the $1.0711 level, indicating potential reversal or hesitation in the market, thus signaling cautious trading conditions.

Considering the current market setup, a cautious buying approach is recommended. Placing a buy limit order at $1.06799 with a take-profit at $1.07440 and a stop loss at $1.06358 could capitalize on potential upswings while managing risk effectively.

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