Technical Analysis

EUR/USD Price Analysis – Jan 31, 2024

By LonghornFX Technical Analysis
Jan 31, 20243 min

Daily Price Outlook 

The EUR/USD pair extended its downward trend, reaching around the $1.0815 level for the day. However, the bearish momentum in the pair can be associated with the disappointing German Retail Sales, which dropped 1.6% MoM in December, compared to a 2.5% decline in November. This decline in German retail sales added downward pressure on the shared currency, affecting the EUR/USD pair.

Furthermore, the broad-based US dollar strength, supported by positive US data, contributed to the bearish bias. The data indicated an unexpected increase in US job openings to 9.02 million in December. Moreover, the ongoing geopolitical conflicts in the Middle East and China's economic challenges played a significant role in bolstering the safe-haven appeal of the US Dollar, contributing to losses in the EUR/USD pair.

EUR/USD Faces Downward Pressure Amidst Weak German Retail Sales and Strong US Dollar

It's important to highlight that the previously released JOLTS report unexpectedly showed a rise in US job openings to 9.02 million in December. This suggests a robust job market, making it less likely for the Federal Reserve to cut interest rates in the first quarter. This, coupled with global uncertainties from conflicts in the Middle East and China's economic challenges, is boosting the safe-haven US Dollar, putting pressure on the EUR/USD pair. \

Investors are now cautious ahead of the Federal Open Market Committee's (FOMC) monetary policy decision, set to be announced later today.

German Retail Sales Decline and ECB Rate Uncertainty Impact Euro

At home, Germany's retail sales faced a setback in December, dropping by 1.6% compared to the previous month, following a 2.5% decline in November. This is worse than experts predicted, as they expected a 0.7% increase. Looking at year-on-year figures, retail sales in Germany fell by 1.7% in December, compared to a 2.4% decline in November.

These numbers indicate a slowdown in economic activity in the Eurozone's major player. As in result, the shared currency is facing pressure against the US Dollar, with the EUR/USD pair showing a modest decrease, trading at 1.0808. In contrast to this, the losses in the EUR/USD pair could be short-lived amid the uncertainty about when the European Central Bank (ECB) will start lowering interest rates.

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

EUR/USD - Technical Analysis

The Euro against the US Dollar (EUR/USD) on January 31 showcases a subdued tone, edging down by 0.24% to trade at $1.08193. The pair's current stance suggests a cautious approach from the market participants as they navigate through key technical thresholds.

The EUR/USD is now operating just below the pivot point of $1.0801, with immediate resistance observed at $1.0864. Should bullish sentiment prevail, the pair may encounter further friction at $1.0922 and $1.0988. Conversely, should selling pressure intensify, the pair finds itself backed by immediate support at $1.0747, with subsequent layers of potential buoyancy at $1.0684 and $1.0617.

The technical indicators provide a more granular perspective; the Relative Strength Index (RSI) lingers at 40, reflecting a bearish bias in the current market sentiment. The Moving Average Convergence Divergence (MACD) analysis reveals a value of 0.00010 above its signal of -0.00105, hinting at a possible shift in momentum to the upside, albeit faintly.

The 50-day Exponential Moving Average (EMA) at $1.08320, slightly above the current price, may act as an inflection point for future price movements.

In summary, the EUR/USD appears to be tentatively bearish with a recommendation to consider short positions below $1.08361. The advised take-profit level rests at $1.07838, with a stop-loss suggested at $1.08687 to contain potential trading risks.

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