EUR/USD Price Analysis – Feb 23, 2024

Daily Price Outlook

Despite the hawkish remarks from US Federal Reserve officials, the EUR/USD currency pair maintained its winning streak and remained well-bid around the 1.0830 level. However, the reason for its bullish momentum could be linked to the mixed PMI figures from the Eurozone, as they suggest resilience in the Eurozone economy, boosting investor confidence in the Euro. However, the positive data includes the increase in preliminary Eurozone and German Services PMIs, suggesting potential strength in the services sector despite manufacturing PMIs falling short of market expectations.

On the other side, the broad-based US dollar bullish bias, backed by the hawkish Fed stance and upbeat US economic data, was seen as a key factor that could cap further gains in the EUR/USD pair.

Impact of Strong US Dollar on EUR/USD Pair

On the US front, the broad-based US dollar prolonged its upward trend, hovering near 103.90, supported by robust US yields. Meanwhile, the greenback received additional upward momentum from strong labor data, with weekly Initial Jobless Claims dropping to 201K, surpassing market expectations. Furthermore, the hawkish stance of US Federal Reserve officials, highlighting hesitation towards near-term rate cuts due to inflation concerns, continues to bolster confidence in the US dollar's strength.

Therefore, the strength of the US dollar, driven by robust yields, positive labor data, and a hawkish Federal Reserve stance, is likely to exert downward pressure on the EUR/USD pair due to increased demand for the dollar.

Eurozone PMIs Lift EUR/USD Despite ECB Caution

On the Euro front, investors are getting support from the upbeat Eurozone and German Services PMIs for February, despite a slight disappointment in Manufacturing PMIs. The European Central Bank (ECB) remains cautious about easing monetary policy, as indicated in their recent meeting accounts, highlighting a reluctance to discuss rate cuts at this stage.

Even though inflation is improving and policymakers are feeling more positive, they're cautious about lowering interest rates, even if inflation forecasts drop in March. Hence, the positive Eurozone and German services PMIs lift the EUR/USD pair.

EUR/USD - Technical Analysis

The EUR/USD pair has exhibited marginal gains in the session dated February 23, with a subtle rise of 0.04%, placing the price at 1.08265. This minor uptick mirrors a cautiously optimistic sentiment in the currency market, as traders weigh the latest economic cues from both sides of the Atlantic.

For the Euro against the Dollar, the pivot point is found at 1.0761, which is key for determining the day's trading bias. Immediate resistance is seen at 1.0823, and a breach here could pave the way to further resistance levels at 1.0869 and 1.0934. These figures represent significant challenges to upward momentum. On the downside, the currency pair finds its immediate support at 1.0712, with additional safety nets at 1.0646 and 1.0602, which could entice buyers back into the market should we see a retracement.

The Relative Strength Index (RSI) hovers at 58, nestled between the overbought and oversold thresholds, implying a neutral market with a slight tilt towards bullishness. The Moving Average Convergence Divergence (MACD) is just below the signal line at -0.00009, compared to 0.00143, indicating a potential for downward pressure or a consolidation phase. The 50-day Exponential Moving Average (EMA) closely aligns with the current price at 1.0824, suggesting the pair is trading at a critical juncture.

The technical perspective of the EUR/USD paints a picture of neutrality with a mild bullish undercurrent. Traders might consider a cautious approach, setting a buy limit at 1.08160 with an aim for taking profits at 1.08576, and placing a stop loss at 1.07832. This conservative strategy allows for participation in potential upside movement while protecting against unexpected downward shifts.