Technical Analysis

EUR/USD Price Analysis – Feb 16, 2024

By LonghornFX Technical Analysis
Feb 16, 20243 min

Daily Price Outlook

Despite the potential rate cut by the ECB, the EUR/USD currency pair managed to gain some traction and remained well-bid around the 1.0775 level. However, the reason for its winning streak can be tied to the declining US dollar, which was pressured by disappointing Retail Sales data. In contrast, the mention of a potential rate cut by ECB Governing Council member François Villeroy de Galhau could exert downward pressure on the EUR/USD pair due to expectations of easing monetary policy. Moving on, traders seem hesitant to place any strong position ahead of key data events, particularly the Producer Price Index (PPI) and Michigan Consumer Sentiment Index from the United States (US) scheduled to be released on Friday.

ECB Rate Cut Speculation and Economic Concerns Impact EUR/USD Pair

European Central Bank (ECB) member François Villeroy de Galhau suggested that they might lower interest rates soon to boost the economy. He thinks it's better not to wait too long. It's likely that interest rates will be cut this year, but we don't know exactly when. The ECB can change rates without making big, sudden moves to help the economy. The head of the ECB, Christine Lagarde, said that the economy is still slow and prices aren't going up much. She wants people to trust that things will improve and prices will rise by 2%. In economic news, the Eurozone's economy grew a bit at the end of last year, and Germany's wholesale prices went down a little in January.

Therefore, the potential rate cut and cautious economic outlook may weigh on the EUR/USD pair, as investors monitor developments regarding monetary policy and economic performance in the Eurozone.

US Dollar Weakness and Fed Rate Cut Expectations Benefit EUR/USD Pair

The US dollar is attempting to rebound amid rising US Treasury yields, but it's struggling to regain ground and remains under pressure. Investors seem to be leaning towards the belief that the Federal Reserve won't cut rates in March or May, with a 52% chance of a rate cut in June according to the CME FedWatch Tool. The EUR/USD pair received a boost from disappointing US Retail Sales data released on Thursday. Atlanta Fed President Raphael W. Bostic is aiming for inflation improvement but warns of potential obstacles ahead. January's Retail Sales and Industrial Production figures both fell short of expectations.

Therefore, the weakening US dollar and market sentiment against potential Fed rate cuts could favor the EUR/USD pair amidst disappointing US economic data.

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

EUR/USD - Technical Analysis

In today's financial discourse, the EUR/USD exchange rate exhibits a slight decline, registering at 1.07610, a 0.11% decrease. This movement underscores the currency pair's recent struggle to maintain upward momentum amidst fluctuating market sentiments. The technical landscape for EUR/USD is encapsulated within pivotal levels that dictate short-term market direction, with a noted pivot point at 1.08. This level stands as a demarcation line, with resistance uniformly pegged at 1.08 across the board, hinting at a significant psychological barrier for traders.

Conversely, support levels are consistently positioned at 1.07, suggesting a potential floor where buying interest could reignite. The Relative Strength Index (RSI) at 54 indicates a market that is neither overbought nor oversold, portraying a balanced dynamic between buyers and sellers. Furthermore, the 50-day Exponential Moving Average (EMA) aligns with the pivot point at 1.08, reinforcing this level's significance in determining the pair's next move.

Given the confluence of technical indicators and key price levels, the EUR/USD pair presents a nuanced outlook. The recommendation leans towards a cautious sell limit at 1.07727, with a calculated take profit at 1.07392 and a stop loss at 1.07943. This strategy reflects a prudent approach amidst the current equilibrium, suggesting that traders anticipate potential downward adjustments before committing to larger positions.



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