EUR/USD Price Analysis – Jan 26, 2024
Daily Price Outlook
The EUR/USD currency pair failed to halt its downward trend and remained well offered around the 1.0850 level. The reason for its decline can be attributed to a combination of factors, including the dovish sentiment surrounding the European Central Bank (ECB) and a bullish US Dollar (USD), which kept the EUR/USD pair under pressure. However, the better-than-expected US Gross Domestic Product (GDP) data on Thursday contributed to the US Dollar's upward trend, which exerted pressure on the EUR/USD pair.
ECB's Hint at Summer Rate Cut Sparks Speculation and Euro Weakness Against the Dollar
It's worth noting that the European Central Bank (ECB) has decided to keep its interest rates steady for the third time in a row. In a statement, ECB President Christine Lagarde hinted at the possibility of a rate cut in the summer. Market watchers are predicting a potential 50 basis point cut by June. Investors anticipate a 50 basis point cut from the ECB by June. Currently, rate swaps indicate an anticipated total of 140 basis points in rate cuts from the ECB by the end of 2024. In simpler terms, the ECB is considering reducing interest rates, and experts predict it might happen in the coming months.
Therefore, the news of a potential rate cut by the ECB has led to speculation in the market. This anticipation may weaken the euro (EUR) against the US dollar (USD), as lower interest rates often make a currency less attractive to investors.
Janet Yellen's Optimistic Outlook Boosts USD on Strong Q4 GDP, Paving the Way for Potential Currency Strength Ahead
Furthermore, US Treasury Secretary Janet Yellen pointed out that the strong 3.3% growth in Q4 GDP, surpassing expectations, is due to increased spending and productivity. She assured that there's no indication of a threat to the US economy's smooth performance. Janet Yellen's positive comments on the solid Q4 GDP growth suggest economic stability. This might boost the US Dollar (USD) against the Euro (EUR) as investors look for the reliability of the USD.
Looking ahead, the upcoming data on Personal Consumption Expenditures (PCE) Price Index, set to be released on Friday. Meanwhile. the upbeat GDP numbers have already lifted the US Dollar Index (DXY), and if this keeps going, we might see the dollar getting stronger against other currencies.
EUR/USD - Technical Analysis
The EUR/USD pair on January 26th is experiencing a slight decline, down 0.04%, with the exchange rate currently standing at $1.0843. This marginal downward movement reflects a market in search of direction amidst varying economic signals from both sides of the Atlantic. The pivot point, an indicator of intraday turning points, is set at $1.0782, which the pair has been hovering above, suggesting a tenuous balance between bullish and bearish forces.
The currency pair confronts immediate resistance at $1.0840, with subsequent barriers at $1.0905 and $1.0963 that may serve as ceilings to upward price aspirations. Should the pair embark on a downward trajectory, it would find support at $1.0718, with further potential floors at $1.0651 and $1.0588 that could halt declines and stabilize the price.
The RSI, situated at 40, indicates a lack of strong momentum either way, leaning slightly towards oversold conditions. The MACD line, barely distinguishable at -0.0004, is just above its signal line at -0.0010, hinting at a potential but not yet established upward momentum. The 50-day EMA at $1.0861 serves as a reference for the pair's short-to-medium-term trend, currently suggesting a recent crossover below this average.
Considering the current technical indicators, the overarching trend for EUR/USD could be deemed as neutral with bearish undertones. A prudent trading approach might involve setting a sell limit order at 1.08507, with a target take profit at 1.07907 and a stop loss at 1.08857, seeking to capitalize on any forthcoming downward movement while mitigating risk.
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