Technical Analysis

EUR/USD Price Analysis – Jan 12, 2024

By LonghornFX Technical Analysis
Jan 12, 20244 min

Daily Price Outlook 

The EUR/USD pair is maintaining its upward momentum, staying well-bid above 1.0980. This trend is driven by a supportive risk-on environment ahead of key US economic data releases. Despite a modest uptick in December's Consumer Price Index (CPI), the broad-based US dollar failed to gain any support. This is attributed to strong job market indicators, reducing the possibility of an coming Federal Reserve rate cut.

However, the upticks in the EUR/USD pair might be short-lived as ECB President Lagarde's statement signals potential future rate cuts if inflation drops to 2%, suggesting a dovish stance. Traders anticipating at least five rate cuts in 2024 may lead to Euro (EUR) weakness against the US Dollar (USD).

Recent US Economic Indicators and Their Impact on Currency Markets

It's worth noting that the US Initial Jobless Claims for the week ending January 6 hit their lowest since mid-October, dropping by 1,000 to 202,000 from the previous week's 203,000. Additionally, the US Consumer Price Index (CPI) for December rose by 3.4% YoY, surpassing the expected 3.2%. The Core CPI, excluding food and energy prices, increased by 3.9% YoY, beating the expected 3.8%. Traders predict the Federal Reserve won't rush into a rate cut, with a 64% chance priced in for a March cut, slightly lower than last week. This suggests a cautious approach based on inflation and job market data.

Therefore, the robust US economic indicators, particularly low jobless claims and higher CPI, may strengthen the US Dollar (USD). Traders anticipating a delayed Fed rate cut could contribute to EUR/USD downward pressure as the Euro (EUR) weakens against the Dollar.

Market Impact: Lagarde's Remarks and Economic Indicators

Furthermore, ECB President Christine Lagarde indicated that the tough times may be over, suggesting possible rate cuts if inflation hits 2%. She mentioned Eurozone interest rates peaked due to last year's high inflation. Traders anticipate five rate cuts in 2024, possibly starting in March or April. Lagarde's hint at potential rate cuts amid improving conditions may weaken the Euro (EUR) against the US Dollar (USD). Traders expecting multiple rate cuts in 2024 could contribute to downward pressure on the EUR/USD pair.

Looking ahead, France and Spain will release their Consumer Price Index (CPI) on Friday, with ECB's Philip Lane set to speak. In the US, the Producer Price Index (PPI) is expected to show a 1.3% YoY increase in December.

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

EUR/USD - Technical Analysis

In today's forex market, the EUR/USD pair exhibits subtle yet noteworthy movements, trading up by a marginal 0.05% at 1.09775. This shift, although slight, indicates the pair's responsiveness to prevailing market dynamics and investor sentiment.

A closer look at the key price levels reveals a pivot point at $1.0867, with immediate resistance forming at $1.0961. The currency pair faces additional resistance at $1.1033 and $1.1124. On the support side, levels to watch include $1.0785, followed by $1.0697 and $1.0606, which could serve as potential rebound points in a bearish scenario.

The Relative Strength Index (RSI) stands at 57, indicating a neutral to slightly bullish sentiment in the market. This reading suggests a balanced market dynamic, with a potential tilt towards buying interest. The Moving Average Convergence Divergence (MACD) hovers around 0.00 with a signal of 0.00052, indicating a neutral momentum with a potential for upward movement.

Additionally, the currency pair trading above its 50-Day Exponential Moving Average (EMA) of $1.0967 further corroborates the short-term bullish trend.

The observed chart patterns, including an upward trendline and the support from the 50 EMA, suggest a continued buying trend above the 1.0950 mark. This pattern implies a bullish momentum, provided the pair maintains its trajectory above these key levels.

In conclusion, the EUR/USD pair exhibits a cautiously optimistic trend with a tilt towards bullishness. For short-term trading, a strategy involving a buy limit at 1.09594, aiming for a take profit at 1.10487, and a stop loss at 1.09026 could be considered.

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