Technical Analysis

EUR/USD Price Analysis – Jan 19, 2024

By LonghornFX Technical Analysis
Jan 19, 20244 min

Daily Price Outlook 

Despite ECB President Christine Lagarde expecting interest rate cuts to be considered by the summer, the EUR/USD currency pair maintained its upward stance and remained well bid around the $1.0877 level. The reason for its upward trend can be attributed to cautious sentiment, as traders are anticipated to closely monitor Germany's Producer Price Index (PPI) data on Friday.

Apart from this, speculations regarding potential rate cuts by the European Central Bank (ECB) in September were seen as a key factor that kept the lid on any additional gains in the EUR/USD pair. ECB President Christine Lagarde, speaking at the World Economic Forum (WEF) in Davos, suggested that interest rate cuts might be considered by the summer.

Speculations of ECB Rate Cuts and Impact on EUR/USD Pair

It's worth noting that the Euro (EUR) might face a challenge due to speculation about potential interest rate cuts by the European Central Bank (ECB) in September. ECB President Christine Lagarde hinted at this during the World Economic Forum, suggesting rate cuts could be considered by summer. Lagarde emphasized that the ECB's interest rates might have reached their peak and that decisions would depend on economic data. She acknowledged ongoing uncertainties and the need for careful consideration in future monetary policy. This uncertainty contributes to a cautious approach, as indicators are not yet firmly established.

Therefore, the Euro (EUR) could experience downward pressure against the US Dollar (USD) as speculations of potential interest rate cuts by the European Central Bank (ECB) create uncertainty, negatively impacting the EUR/USD pair.

Rising Yields and Economic Data Impacting EUR/USD Pair

Furthermore, the US Dollar Index (DXY) is holding steady, maintaining recent gains and showing a positive trend. The rise in US Treasury yields is adding support to the strength of the US Dollar. Currently, the 2-year and 10-year yields on US bonds are at 1.36% and 1.16%, respectively.

Meanwhile, the recent robust economic data, including better-than-expected US Housing Starts in December at 1.46 million and increased Building Permits at 1.495 million, is reinforcing the positive momentum. Furthermore, the decline in Initial Jobless Claims to 187,000 signals a resilient job market. These factors collectively challenge early expectations of interest rate cuts by the US Federal Reserve in March.

Therefore, the positive trend in the US Dollar, supported by rising Treasury yields and strong economic data, may exert downward pressure on the EUR/USD pair as the Dollar gains strength against the Euro.

Germany's PPI and US Consumer Sentiment Index in Spotlight

Moving on, traders are expected to keep a close eye on Germany's Producer Price Index (PPI) data this Friday. At the same time, attention will be on the US preliminary Michigan Consumer Sentiment Index for January.

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

EUR/USD - Technical Analysis

The EUR/USD pair, a key indicator of transatlantic economic health, has experienced a slight uptick as of January 19, 2024, trading at 1.08860, which is a 0.09% increase from the previous day. This movement, though modest, offers a window into the subtle dynamics at play in the forex market.

The pair's pivot point stands at 1.08649, serving as a baseline for intraday traders. The immediate resistance levels are positioned at 1.09093, 1.09538, and 1.09965, each representing potential ceilings that the Euro might face against the Dollar. On the support front, levels are found at 1.08186, 1.07706, and 1.07261, which could act as cushions in the event of a downward correction.

Turning to technical indicators, the Relative Strength Index (RSI) is at 46, indicating a neutral momentum with neither overbought nor oversold conditions dominating. The Moving Average Convergence Divergence (MACD) presents a nuanced picture, with a value of 0.0003 and a signal at -0.0014. This subtle divergence suggests that market participants are waiting for clearer signals before committing to more significant positions.

The 50-Day Exponential Moving Average (EMA) is currently at 1.08792, nearly aligning with the current trading levels, indicating a potential battleground for traders.

A key observation in chart patterns is the EUR/USD pair retesting a previously violated double bottom support level at 1.0906. This retest is crucial as it could either confirm the strength of this level or indicate a potential shift in market sentiment.

The overall market trend for EUR/USD seems to be in a state of equilibrium, with a slight tilt towards bearishness. Traders might consider a sell limit at 1.08908, taking profit at 1.08386 and placing a stop loss at 1.09264 to manage risks effectively. The short-term forecast suggests the pair may test the resistance levels, especially around 1.09093, indicating a period of tentative upward momentum, but with underlying caution due to the close proximity of key technical indicators and chart patterns.

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