Technical Analysis

EUR/USD Price Analysis – Dec 29, 2023

By LonghornFX Technical Analysis
Dec 29, 20233 min

Daily Price Outlook

In Friday's Asian trading session, the EUR/USD currency pair exhibited a modest upward trend, reaching around 1.1070, marking a 0.04% increase for the day. This change comes after a slight pullback from its recent high of 1.1139. The fluctuations in this major currency pair are largely shaped by the differing monetary policy approaches of the European Central Bank (ECB) and the Federal Reserve (Fed).

Euro Boosted by ECB's Firm Stance

The Euro has gained some traction thanks to the ECB's hawkish outlook. ECB officials have maintained a stance against market expectations of easing monetary policy. Their commitment to making data-driven decisions, independent of external pressures, has bolstered the Euro, contributing to the pair's recent upswing.

Fed's Softening Outlook Influences Market

In contrast, the Fed's more dovish remarks have influenced market sentiments in the opposite direction. Investors are increasingly betting on the US central bank cutting interest rates as early as the coming year. This sentiment is evident in the CME FedWatch Tool, which shows over an 87% likelihood of a rate cut by March, indicating a major shift in expectations.

Mixed US Economic Indicators

The US economic landscape presents a complex picture, with recent data showing mixed signals. Initial Jobless Claims for the week ending December 23 rose to 218,000, surpassing expectations and previous figures. Meanwhile, November's US Pending Home Sales did not meet the anticipated 1.0% increase, staying flat and adding to the mixed economic narrative.

Subdued Market Activity as Year Ends

As 2023 winds down, a quieter market is anticipated for the year's final trading day. Key indicators that investors will watch include Spain’s preliminary Consumer Price Index (CPI) for December and the US Chicago PMI for the same month. These data points could provide crucial insights for currency traders and set the tone for early 2024.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis

In the realm of foreign exchange markets, the EUR/USD pair presents an intriguing scenario as it stabilizes above a crucial upward channel's support, currently trading around 1.1064. Despite losing 0.39% on Thursday, the pair exhibits resilience on Friday, suggesting a potential shift in momentum.

The EUR/USD pair is operating within a distinct framework of key technical levels. The pivotal point for the pair is set at $1.1060, with immediate resistance lying ahead at $1.1129, followed by further barriers at $1.1174 and $1.1230. These levels mark potential turning points for the currency pair. On the downside, the immediate support is observed at $1.1006, with additional supports at $1.0941 and $1.0891, providing significant thresholds that could influence the pair's movement.

Technical indicators add depth to this analysis. The Relative Strength Index (RSI) stands at 54, indicating a moderately bullish sentiment. This suggests that the pair might have enough momentum to pursue an upward trajectory. Further supporting this bullish outlook is the fact that EUR/USD trades above its 50-Day Exponential Moving Average (EMA) of $1.1011, typically a sign of a short-term bullish trend.

Chart patterns reveal a compelling story. An upward channel is currently in play, indicating a supportive trend for the pair. Additionally, the closing of a tweezer's bottom candlestick pattern above $1.1059 signals potential buying interest. This pattern is often seen as a bullish reversal indicator, suggesting that the pair might be poised for an upward movement.

In conclusion, the overall trend for EUR/USD appears cautiously bullish, particularly if it sustains above the key level of $1.10584. Traders might consider a buy entry above this level, targeting a potential take profit at 1.1141 while maintaining a stop loss at 1.09753. This forecast points towards a potential upward movement in the short term, but as always in the forex market, vigilance and attention to changing market dynamics are key.

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