Technical Analysis

EUR/USD Price Analysis – Jan 08, 2024

By LonghornFX Technical Analysis
Jan 8, 20244 min

Daily Price Outlook 

The EUR/USD currency pair continued its downward rally and remained well offered around the 1.0930 level. The downward trend can be attributed to the bullish US dollar and disappointing German Retail Sales data, which came in worse than expected, falling to 2.4% YoY from a 0.1% drop in the previous reading.

Investors will closely watch Germany's Trade Balance and Eurozone Retail Sales for November on Monday. Later this week, the US Consumer Price Index (CPI) comes out on Thursday, followed by the US Producer Price Index (PPI) for December on Friday.

Federal Reserve's Cautious Stance and Strong Job Data Impact on USD and EUR/USD Pair

It's worth noting that the Federal Reserve is shifting its stance, leaning towards a more cautious approach due to easing inflation, although aggressive rate cuts aren't a sure thing. Investors are eagerly awaiting Thursday's US inflation data for further insight. The expected rise in the Consumer Price Index (CPI) is 3.2% YoY, with the Core CPI easing to 3.8% YoY. However, Friday's US labor data created uncertainty about the anticipated March interest rate cuts. Nonfarm Payrolls (NFP) for December surpassed expectations, with 216,000 jobs added, exceeding the consensus of 170,000. This unexpected jobs boost has left markets questioning the Fed's next move.

Therefore, the Fed's cautious stance and unexpected strong US job data may bolster the USD against the EUR. Traders will closely monitor the inflation figures for potential shifts in the EUR/USD pair.

Potential Impact of Eurozone Economic Indicators on EUR/USD Pair

Moreover, investors are keenly eyeing November's Eurozone Retail Sales on Monday, anticipating a -0.3% monthly decrease compared to October's 0.1%. The annual rate is expected at -1.5%, a slight dip from October's -1.2%. The recent gloomy German Retail Sales report indicates potential downside risks for the Eurozone.

On Friday, Germany's Retail Sales in November took a hit, dropping more than expected to -2.4% YoY. The monthly numbers were particularly bleak, falling sharply to -2.5% MoM compared to the previous 1.1% increase. Besides this, the Eurozone's Consumer Prices Index for December went up by 2.9% YoY, and the Core figure rose by 3.4%, both below what was predicted. This news indicates some economic challenges, especially in retail, and could impact broader Eurozone trends.

Therefore, the downbeat Eurozone and German retail sales, coupled with lower-than-expected consumer price increases, may put downward pressure on the Euro (EUR) against the US Dollar, affecting the EUR/USD pair.

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

EUR/USD - Technical Analysis

The EUR/USD pair, as of January 8, is trading at 1.09348, showing a minor decline of 0.07%. This movement indicates a consolidation phase, evident in the 4-hour chart. Key price levels include a pivot point at 1.0957, with immediate resistance at 1.1035 and further resistance at 1.1123 and 1.0788. Support levels are identified at 1.0695 and 1.0604, critical for short-term trading decisions.

The technical indicators provide a nuanced view. The Relative Strength Index (RSI) is at 43, suggesting a neutral to slightly bearish sentiment. This level indicates neither overbought nor oversold conditions. The Moving Average Convergence Divergence (MACD) stands at -0.002, pointing to a mild bearish momentum as it remains below the signal line. Additionally, the pair's position slightly below the 50-Day Exponential Moving Average (EMA) at 1.0939 supports a short-term bearish outlook.

Chart patterns do not clearly define the trend direction, but candlestick analysis could offer short-term trading insights. For instance, doji candles might signal market indecision, while a bullish engulfing pattern could indicate potential upward movement.

In conclusion, the overall trend for EUR/USD is neutral to bearish. Traders should watch the support and resistance levels closely. A prudent strategy could involve a short position below 1.09699, targeting 1.08802 for profit-taking, and placing a stop-loss at 1.10318. This approach aligns with the market sentiment and technical indicators, offering a structured method for navigating the current market dynamics.

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