EUR/USD Price Analysis – Aug 07, 2024
Daily Price Outlook
During the European trading session on Wednesday, the EUR/USD currency pair failed to halt its downward trend and remained offered around the 1.0918 level, hitting an intra-day low of 1.0905.
This decline can be attributed to the European Central Bank's (ECB) downbeat view of the Eurozone's economic prospects, which continues to undermine the shared currency and exert downward pressure on the EUR/USD pair.
Conversely, rising expectations of a 50-basis point rate cut by the Fed in September have weakened the US dollar, helping to limit deeper losses in the EUR/USD pair.
The CME FedWatch tool indicates a 67.5% chance of a 50-basis point Fed rate cut in September, up from 13.2% last week.
US Dollar Weakens on Rate Cut Expectations, EUR/USD Limits Losses
On the US front, the broad-based US dollar struggled to sustain its bullish momentum and edged lower as expectations of a more aggressive rate cut in September increased.
This shift followed weaker US employment data for July, which heightened concerns about a potential recession.
The CME FedWatch tool now indicates a 67.5% probability of a 50-basis point interest rate cut by the Federal Reserve in September, a significant rise from 13.2% a week earlier.
According to Reuters, Federal Reserve Bank of San Francisco President Mary Daly indicated that risks to the Fed's mandates are becoming more balanced, suggesting a potential openness to cutting rates in future meetings.
Additionally, Chicago Fed President Austan Goolsbee mentioned that the central bank is ready to take action if economic or financial conditions deteriorate.
Therefore, the US dollar's decline due to increased rate cut expectations and weaker employment data has exerted upward pressure on the EUR/USD pair. The anticipated Fed rate cut and dovish Fed signals contribute to a more favorable environment for the euro.
Euro Faces Pressure as ECB Remains Cautious, but German Data Provides Support
On the EUR front, the shared currency is under pressure against the USD due to the European Central Bank's (ECB) gloomy outlook on the Eurozone economy.
However, strong economic data from Germany is providing some support. Recent figures from Destatis show that Germany’s industrial sector grew by 1.4% in June, exceeding expectations of a 1.0% increase and recovering from a 2.5% decline in May.
This growth in Germany, the Eurozone’s largest economy, helps stabilize the euro and mitigate further losses.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.09189, marking a 0.14% decline as the market remains cautious amidst mixed economic signals.
The pivot point for today is set at $1.0956, acting as a critical threshold that could determine the currency pair's short-term direction.
Immediate resistance is identified at $1.0955, with further resistance levels at $1.1010 and $1.1043. Overcoming these barriers could signal a potential shift in momentum toward a bullish trend.
On the downside, immediate support is seen at $1.0867, followed by additional support levels at $1.0828 and $1.0777.
The Relative Strength Index (RSI) is positioned at 54, indicating a neutral stance in terms of market momentum, as it sits in the middle of the scale.
The 50-day Exponential Moving Average (EMA) is at $1.0863, suggesting that the market is maintaining a slight bullish bias as long as the price remains above this indicator.
The recommended strategy for traders is to consider entering a long position with a buy limit at $1.08935, targeting a take-profit at $1.09557 while setting a stop-loss at $1.08653 to manage risk.
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