Technical Analysis

EUR/USD Price Analysis – Jan 17, 2024

By LonghornFX Technical Analysis
Jan 17, 20243 min

Daily Price Outlook

Despite the bullish US dollar, the EUR/USD currency pair maintained its upward trend and ticked higher around the 1.0880 level. The reason for this upward trend could be attributed to the upcoming release of the final Eurozone CPI print, which might influence the Euro. Meanwhile, mixed messages from ECB leaders could make investors unsure about making strong moves.

ECB Policy Divergence and USD Strength Impact EUR/USD Outlook

It's important to mention that the shared European currency is facing challenges in finding buyers because there are mixed opinions among European Central Bank (ECB) policymakers regarding inflation and interest rates. Joachim Nagel, the President of Bundesbank, thinks it's too early to talk about cutting interest rates due to high inflation. On the other hand, Tuomas Valimaki from the ECB Governing Council is open to the idea of lowering interest rates sooner. This uncertainty, combined with a positive vibe around the US Dollar, suggests a less positive outlook for the EUR/USD pair in the short term.

Consequently, the conflicting views among ECB policymakers on interest rates and inflation create uncertainty for the EUR/USD pair. Joachim Nagel's caution and Tuomas Valimaki's openness, coupled with a strong US Dollar, signal a less optimistic near-term outlook for EUR/USD.

USD Strength and Cautious Fed Stance Impact EUR/USD Pair

Furthermore, the broad-based US Dollar is standing strong near its highest point since December 13. This strength is fueled by reduced expectations for an early interest rate cut by the Federal Reserve (Fed). Last week, despite slightly higher US consumer inflation, Fed Governor Christopher Waller said we should be cautious and not rush rate cuts because the economy is doing well. This stance supports higher US Treasury bond yields, coupled with a cautious market sentiment, boosting the safe-haven appeal of the dollar and putting a lid on the EUR/USD pair.

Therefore, the robust performance of the USD Index, driven by reduced expectations for a prompt Fed rate cut, and Governor Waller's cautious stance, supporting higher Treasury bond yields, create a cautious market. This favors the safe-haven dollar, restricting the upside potential for the EUR/USD pair.

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

EUR/USD - Technical Analysis

As of January 17, the EUR/USD pair is trading at 1.08597, marking a slight decrease of 0.15% within a 24-hour period. Analyzing the 4-hour chart, we can discern several critical levels that could influence the pair's short-term direction. The pivot point is established at 1.08175, indicating a potential shift in market sentiment. Resistance levels are identified at 1.08645, 1.09081, and 1.09539, which could act as barriers to upward movement. On the flip side, support levels are found at 1.09975, 1.07728, and 1.07258, offering potential floors for price dips.

The technical indicators provide a deeper insight into the pair's momentum. The RSI stands at 27, suggesting an oversold condition that might lead to a price correction. The MACD, at -0.00078, with its line below the signal line at -0.00244, indicates a bearish trend. The 50-Day EMA is positioned at 1.09361, further reinforcing the resistance zone.

A key observation in the chart patterns is the violation of the upward trendline around $1.0928. The closing of a bearish engulfing pattern below this level supports a selling trend, signaling a potential continuation of the downward momentum.

The overall trend for EUR/USD appears bearish. Traders might consider a sell strategy below 1.08812, with a take profit target at 1.08263 and a stop loss at 1.09151. The short-term forecast suggests the pair may test lower support levels, unless it breaks above the immediate resistance.

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