EUR/USD Price Analysis – Aug 23, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair made a modest recovery, edging higher to near 1.1113, hitting the intra-day high of 1.1132 level.
This upward movement was largely driven by a weaker US dollar, which dropped as traders shifted their focus to Federal Reserve (Fed) Chair Jerome Powell’s anticipated speech at the Jackson Hole Symposium. The US dollar resumed its recent weakness following a brief recovery, amid caution ahead of Powell's remarks.
Meanwhile, the expectations that the European Central Bank (ECB) might cut interest rates further in September also contributed to the euro's gains. However, increasing expectations of further ECB rate cuts could limit the upside potential for the EUR/USD pair.
Impact of Federal Reserve's Anticipated Guidance on EUR/USD Amid Weak US Dollar
Despite the stronger-than-expected US S&P Global PMI report for August, which showed a robust expansion in the services sector and a slight contraction in manufacturing, the US dollar edged lower.
The market anticipates that Jerome Powell will provide fresh guidance on interest rates and the US economic outlook during his Jackson Hole speech. Federal Reserve officials have hinted that a rate cut in September may be appropriate if economic data continues to align with expectations.
This dovish sentiment is likely to influence the EUR/USD pair, potentially weakening the dollar further against the euro if Powell’s remarks suggest a more accommodative monetary policy stance.
Anticipated ECB Rate Cuts and Their Impact on EUR/USD Outlook
On the EUR front, the European Central Bank is widely anticipated to cut interest rates again in September, driven by uncertainties over the Eurozone’s economic outlook and lower wage growth.
The recent flash Eurozone HCOB PMI report for August showed improved business activity, but this positive signal may be short-lived due to weak foreign demand, especially in Germany. The decline in Q2 Negotiated Wage Rates, which eased inflation concerns, has bolstered expectations for more ECB rate cuts.
As such, while the EUR/USD pair benefits from a weaker US dollar, the potential for additional ECB rate cuts could limit further gains. Traders are now looking ahead to Powell’s speech for fresh direction and weighing the implications of ongoing economic developments on the EUR/USD outlook.
EUR/USD - Technical Analysis
The EUR/USD is currently holding steady at $1.11136, showing a modest increase of 0.01% for the day. The pair is navigating a relatively narrow trading range, with the pivot point resting at $1.11092, acting as a critical level for determining the short-term direction.
As we look at the 4-hour chart, the immediate resistance is marked at $1.11644, followed by higher levels at $1.11910 and $1.12238. On the downside, immediate support can be found at $1.10769, with further support levels at $1.10491 and $1.10194.
The technical indicators offer a mixed picture, with the RSI sitting at 58, signaling neutral momentum that could sway in either direction depending on the upcoming price action.
Meanwhile, the 50-day EMA at $1.10510 is providing solid support, indicating that the pair is maintaining a bullish bias above this level.
If the EUR/USD manages to break above the $1.11644 resistance, we could see a continuation of the upward trend, potentially driving the price toward the $1.11910 level.
However, if the pair fails to hold above the $1.11092 pivot point, a decline toward the $1.10769 support level could be on the cards. Traders should be cautious, as a break below $1.10769 might trigger a deeper correction.
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