EUR/USD Price Analysis – Aug 26, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair failed to maintain its upward trend and turned bearish around the 1.1166 level, hitting an intra-day low of 1.1163.
The downward trend can be attributed to growing speculation that the European Central Bank (ECB) will reduce interest rates again in the September meeting. The ECB is also expected to deliver one more interest rate cut in the last quarter of this year.
This undermined the shared currency and contributed to the EUR/USD pair's losses. On the other hand, the bearish US dollar, driven by the dovish Fed, was seen as a key factor that limited any additional losses in the EUR/USD pair.
ECB Rate Cut Speculation and Economic Uncertainty Weigh on EUR/USD
On the EUR front, market expectations for ECB interest rate cuts in September have increased due to rising uncertainty over the Eurozone's economic outlook and slowing wage growth.
Although economic activity in the Eurozone showed unexpected growth in August, according to the flash HCOB PMI report, this was mainly driven by strong demand in France related to the upcoming Olympics in Paris.
Economists consider this as a temporary boost rather than a sign of long-term improvement.
Adding to the uncertainty, ECB Chief Economist Philip Lane emphasized the need for restrictive monetary policy at the Jackson Hole Symposium, acknowledging some progress in inflation control but warning that success is not guaranteed.
Investors are now closely watching the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for August, set to be released on Thursday and Friday.
These figures will offer more insight into future interest rate decisions, with Eurozone annual headline and core HICP expected to have slowed to 2.3% and 2.8%, respectively.
Meanwhile, the IFO Institute's report on Monday showed that the German Business Climate, Current Assessment, and Expectations for August exceeded expectations but were still lower than July’s figures. This data did not provide any significant boost to the EUR/USD pair.
Therefore, the news heightened concerns over the Eurozone's economic outlook and potential ECB rate cuts, leading to a bearish impact on the EUR/USD pair. Despite some positive data, the uncertainty limited any significant upward movement for the euro.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.11828, reflecting a slight dip of 0.09% on the day. As we analyze the 4-hour chart, it becomes clear that the currency pair is hovering near a crucial pivot point at $1.1201.
This level is proving to be a significant battleground for bulls and bears alike, with immediate resistance sitting just above at $1.1232.
The EUR/USD has been on an upward trajectory in recent sessions, but the momentum is showing signs of fatigue as it nears overbought conditions.
The Relative Strength Index (RSI) is currently at 69, suggesting that the pair is approaching overbought territory. While the RSI hasn’t yet crossed the 70 mark, it's close enough to warrant caution.
Traders may want to consider this as a signal that the upward momentum could be losing steam. Meanwhile, the 50-day Exponential Moving Average (EMA), currently positioned at $1.1077, is still well below the current price, reinforcing the general uptrend that we’ve seen over the past few weeks.
Should the price break above the immediate resistance at $1.1232, the next hurdles to watch are $1.1266 and $1.1299.
A clear break above these levels could set the stage for further gains. On the downside, immediate support is located at $1.1150, with additional support levels at $1.1107 and $1.1072.
If EUR/USD slips below $1.1150, we might see a more pronounced correction, bringing the pair closer to the 50 EMA at $1.1077.
Conclusion: The EUR/USD outlook remains cautiously optimistic as long as the pair stays above the $1.1150 support level.
However, traders should be mindful of the near-overbought RSI. Consider selling below $1.1201 with a target of $1.1150, and set a stop loss at $1.1232 to manage risk.
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