EUR/USD Price Analysis – Aug 21, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair has faced downward pressure, slipping from its earlier highs as the US dollar stages a rebound.
The pair, which had previously held above the 1.1133 support level, is now trading near 1.1109. This decline highlights a shift in market dynamics, with the US dollar strengthening against the Euro.
US Dollar Strengthens Despite Expected Fed Rate Cuts, Pressuring EUR/USD
On the US front, the recent strengthening of the US dollar comes despite anticipated rate cuts by the Federal Reserve.
Typically, rate cuts by the Fed lead to a weaker greenback; however, the current rebound is driven by broader market factors and speculation about future economic conditions.
The US Dollar Index (DXY) has climbed to approximately 101.50, reflecting heightened investor confidence in the US economy despite expected monetary easing.
Therefore, the US dollar's strength and rising US Dollar Index (DXY) pressure the EUR/USD pair, causing it to decline.
Increased investor confidence in the US economy, despite expected Fed rate cuts, boosts the dollar and weighs on the euro.
Euro Faces Pressure from Mixed Economic Data and Geopolitical Uncertainties
On the Euro side, the European Central Bank (ECB) has been cautious about committing to aggressive rate cuts, which has provided some support to the Euro. However, recent data from the Eurozone has painted a mixed picture.
The ECB's reluctance to cut rates aggressively stems from persistent inflationary pressures in the Eurozone and slower growth in key economies like Germany.
Although slower wage growth in Germany has eased some pressure on the ECB, overall Eurozone economic performance remains uneven.
The Euro has faced challenges from a combination of weaker-than-expected economic data and ongoing geopolitical uncertainties.
Market participants are also keeping an eye on upcoming Eurozone data, including the HCOB Purchasing Managers’ Index (PMI) and Q2 Negotiated Wage Rates, which will provide further insights into the economic outlook for the Eurozone.
EUR/USD - Technical Analysis
EUR/USD is currently trading at $1.11205, showing a modest increase of 0.05% on the day. On the 4-hour chart, the pivot point is situated at $1.1132, a critical level that could dictate the pair's next move.
Immediate resistance is at $1.1164, followed by $1.1191 and $1.1224. On the downside, immediate support is seen at $1.1089, with further levels at $1.1063 and $1.1041.
The Relative Strength Index (RSI) stands at 76, indicating that the pair is firmly in overbought territory. This suggests that the upward momentum may be losing steam, potentially opening the door for a bearish correction.
The 50-day Exponential Moving Average (EMA) is positioned at $1.1000, providing a longer-term bullish signal, but the short-term outlook remains cautious due to the overbought conditions.
Given the overbought RSI and the strong resistance levels ahead, a pullback could be on the horizon. If the pair fails to sustain its upward momentum above the pivot point at $1.1132, a decline toward the next support levels could be expected.
Traders may consider selling below $1.11316, targeting a take profit at $1.10640 with a stop loss at $1.11651.
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