EUR/USD Price Analysis – Aug 16, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair maintained its upward momentum, hovering around the $1.0993 mark and reaching an intra-day high of 1.0993.
This upward movement was primarily driven by a weaker US dollar, which lost ground amid growing expectations that the Federal Reserve (Fed) might start cutting interest rates beginning with its September meeting.
Additionally, risk-on market sentiment, fueled by strong US economic data, was another key factor pressuring the US dollar and contributing to gains in the EUR/USD pair.
However, increasing bets on more ECB rate cuts could undermine the EUR currency and cap gains in the EUR/USD pair.
Impact of Federal Reserve's Dovish Signals on EUR/USD Amid Strong US Data
Despite Thursday's upbeat US macro data, the broad-based US dollar failed to halt its downward trend and edged lower on the day as markets anticipate a Federal Reserve interest rate cut in September.
Federal Reserve officials, including Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard, have hinted that a rate cut might be needed soon due to easing inflation pressures and changing economic risks.
This situation has created uncertainty about the dollar's future performance. These developments are likely to influence the EUR/USD pair, potentially weakening the dollar against the euro if the Fed signals a dovish monetary policy stance in response to economic conditions.
On the data front, the US Census Bureau reported a 1% increase in retail sales for July, surpassing expectations of a 0.3% rise.
Excluding autos, sales were up 0.4%, exceeding the anticipated 0.1% gain. Additionally, the US Department of Labor (DOL) disclosed that initial jobless claims for the week ending August 10 totaled 227,000, better than the expected 235,000 and the previous week’s 234,000.
These stronger-than-expected figures underscore the resilience of the US economy and reinforce the view that the labor market remains robust.
ECB Rate Cut Expectations and EUR/USD Short-Term Outlook
On the EUR front, expectations that the European Central Bank (ECB) will cut rates further due to declining inflation in the Eurozone are limiting gains for the EUR/USD pair.
Despite this, the pair remains on track for modest weekly gains, with some buying support near the 1.0990 level on Thursday suggesting caution before expecting deeper losses.
Traders are now focusing on upcoming US macro data, including Building Starts, Housing Permits, and the Preliminary Michigan Consumer Sentiment Index, for short-term trading opportunities.
EUR/USD - Technical Analysis
EUR/USD is showing signs of a potential bullish breakout, currently trading at $1.09842, up 0.04% for the day.
The pair is hovering just above its pivot point at $1.0972, which is a key level to watch for further upside.
Immediate resistance is seen at $1.1043, and if the pair can close above this level, it could target the next resistance levels at $1.1073 and $1.1105.
The Relative Strength Index (RSI) is moderately positioned at 55, indicating there's room for further upward movement before entering overbought territory.
The 50-day Exponential Moving Average (EMA) at $1.0947 is providing solid support, reinforcing the bullish outlook.
Immediate support levels are at $1.0883 and $1.0845, with an additional safety net at $1.0922. These levels are crucial to maintain the current bullish momentum.
If the price dips below $1.0972, a short-term pullback could be in the cards, but the overall outlook remains positive as long as it holds above the 50-day EMA.
For those considering entering the market, buying above $1.0972 could be a strategic move, targeting a take-profit at $1.10339.
A stop-loss should be placed at $1.09376 to manage potential downside risks. The key area to watch is the $1.1043 resistance, which could determine the sustainability of this bullish trend.
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