EUR/USD Price Analysis – Feb 21, 2024

Daily Price Outlook

Despite the sluggish growth in the European economy, the EUR/USD currency pair has been able to trade on a bullish track and gain momentum above the 1.0812 level. However, the bullish factor behind its upward trend is only the bearish US dollar, which recently lost its strength and turned down just above its lowest level in almost three weeks. Investors expect the Federal Reserve to reduce interest rates four times by 25 basis points each in 2024, starting in June. 

This expectation is causing the US Dollar to weaken and support the EUR/USD pair. In contrast to this, the ongoing economic challenges in the European economy are likely to exert downward pressure on the EUR currency, which could cap further gains in the EUR/USD pair.

Anticipation of Potential Interest Rate Cuts and its Impact on the US Dollar

On the US front, the broad-based US dollar is losing its strength as the experts anticipate that the Federal Reserve might lower interest rates in June, but strong economic growth and inflation worries could potentially delay this decision. Federal Reserve officials, including Chair Jerome Powell, have stated their intention to ensure clarity regarding inflation before considering rate cuts. 

Investors are eagerly awaiting updates from the Fed this week to gain insight into potential developments. Therefore, the anticipation of interest rate cuts due to economic concerns exerted downward pressure on the US dollar as it indicates uncertainty and weakening of the economy.

Geopolitical Instability and Its Impact on Currency Markets

On the other hand, the long-lasting conflict between Israel and Gaza has resulted in considerable casualties, with thousands killed and injured. Simultaneously, tensions between the US and Russia have escalated over reports of Russia's potential development of space-based anti-satellite nuclear weapons. This geopolitical instability could boost the US dollar as a safe-haven asset, likely pressuring the EUR/USD pair downward due to market sentiment favoring the dollar's stability.

EUR/USD - Technical Analysis

On February 21st, the EUR/USD pair showed a modest upward movement, registering a 0.10% increase to 1.08169. This slight appreciation reflects a cautious optimism among traders as they navigate through a mix of economic signals from both Europe and the United States. The forex market continues to weigh the ongoing economic recovery efforts in the Eurozone against the backdrop of monetary policy adjustments by the Federal Reserve.

The pivot point for the EUR/USD is set at 1.0760, indicating a foundational level from which price movements may pivot. Resistance levels are identified at 1.0827, 1.0870, and 1.0937, marking potential ceilings where upward momentum could face headwinds. On the downside, support levels at 1.0714, 1.0647, and 1.0600 provide safety nets, potentially arresting any declines and offering opportunities for rebounds.

The Relative Strength Index (RSI) at 64 signals a growing bullish momentum, nearing the threshold of overbought conditions but still suggesting room for upward movement. The Moving Average Convergence Divergence (MACD), with a reading of 0.0015 above the signal line of 0.0004, corroborates the bullish sentiment, indicating a possible continuation of the upward trend. Additionally, the 50-day Exponential Moving Average (EMA) at 1.0802, closely aligned with the current price, supports the notion of sustained bullish momentum in the near term.

Given the alignment of technical indicators and key price levels, the EUR/USD currency pair demonstrates a cautiously bullish outlook. Investors are advised to consider entering long positions above 1.08043, with a take-profit target set at 1.08360, and a stop loss at 1.07833 to mitigate potential risks. This strategic approach leverages the current market dynamics, aiming to capitalize on the expected continuation of the pair's upward trajectory while protecting against unexpected market swings.