EUR/USDPrice Analysis – April 26, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair maintained its upward trend and remained well-bid around 1.0731 level, reaching an intra-day high of 1.0753. However, the main factor behind the EUR/USD's upward trend is the market sentiment regarding the timing of potential Fed interest-rate cuts.
Despite a slightly disappointing US GDP growth rate for Q1, the unexpectedly high Personal Consumption Expenditures Prices component supported the US Dollar. As a result, the probability of a rate cut at the Fed's July meeting decreased, providing temporary strength to the dollar.
However, the Euro has managed to maintain its ground, driven by factors such as improved economic sentiment in the Eurozone and speculation about the ECB's future monetary policy.
Impact of the Core PCE Price Index Release on the EUR/USD
Looking ahead, the forthcoming release of the core Personal Consumption Expenditures (PCE) Price Index for March is set to introduce additional volatility into the EUR/USD currency pair.
Analysts predict the core PCE index may show prices rising more than expected, following a strong GDP report. If the increase exceeds economists' forecast of 2.6%, especially surpassing the previous month's 2.8%, it suggests ongoing inflation. This could lead the Fed to keep interest rates steady for longer, which might weaken the EUR/USD exchange rate. In essence, higher-than-expected inflation could make the US dollar more attractive, potentially causing the euro to lose value against it.
On the flip side, if the core PCE comes in lower than expected, it could speed up the belief that the Fed will cut interest rates soon. This would likely make the US dollar weaker and cause the EUR/USD pair to rise. Currently, the CME FedWatch Tool indicates there's a chance of a rate cut in September.
Therefore, the EUR/USD pair could weaken if the core PCE index shows higher-than-expected inflation, leading the Fed to maintain interest rates. Conversely, a lower-than-expected reading might strengthen the pair due to expectations of a rate cut.
US Economic Indicators and Their Impact on EUR/USD Pair
On the flip side, the performance of the EUR/USD currency pair remains linked to key US economic indicators, particularly amid expectations regarding Fed monetary policy. The recent slowdown in US economic growth, with Q1 GDP expanding by 1.6% compared to market expectations of 2.5%, has highlighted concerns about the pace of recovery. Despite this, inflationary pressures have persisted, as evidenced by the Personal Consumption Expenditures Price Index climbing at a 3.4% annual rate, surpassing the Fed's 2% target.
Looking ahead, investors are eagerly waiting for the upcoming inflation report, expecting a 0.3% increase in both headline and core PCE figures. The relationship between economic growth and inflation is important, affecting market sentiment and the outlook for stocks, which also influences the EUR/USD pair.
EUR/USD - Technical Analysis
On April 26, the EUR/USD pair experienced a slight decline, closing at 1.07223, down by 0.06%. Despite the modest drop, the pair remains in close proximity to the key pivot point at 1.0714, suggesting a potential for pivotal market movements in upcoming sessions.
Technical analysis indicates that the EUR/USD has immediate resistance at 1.0746, with further resistance seen at 1.0778 and 1.0822. These levels will be crucial for traders to monitor as a break above could signify a continuation of bullish momentum. Conversely, the currency pair has established immediate support at 1.0674. Additional support levels are positioned at 1.0636 and 1.0609, which could play a pivotal role should the pair continue its downward trajectory.
The Relative Strength Index (RSI) stands at 59, indicating that the market is neither overbought nor oversold, and there is still room for upward price movement. The 50-Day Exponential Moving Average (EMA) at 1.0693 serves as a near-term support level, slightly below the current price, which adds an additional layer of support for the EUR/USD.
Given the current market conditions and technical setup, traders might consider entering a long position if the EUR/USD rises above 1.07129, aiming for a take profit at 1.07657 and placing a stop loss at 1.06789 to manage risk effectively.
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