EUR/USD Price Analysis – July 19, 2024

Daily Price Outlook

During the European trading session, the EUR/USD pair continued its downward trend, settling around 1.0884 and hitting an intraday low of 1.0876.

This decline was driven by a strengthening US dollar, bolstered by growing speculation that the Republican Party might win the upcoming US Presidential elections.

Additionally, the EUR/USD pair's losses were exacerbated by comments from ECB official Villeroy, who suggested that two more rate cuts this year might be appropriate. This outlook weighed on the euro, further contributing to the pair's decline.

US Dollar Strengthens Amid Fed Rate Cut Speculation and Rising Unemployment, Potentially Impacting EUR/USD

On the US front, the broad-based US dollar is gaining strength even though investors anticipate that the Federal Reserve (Fed) might start cutting interest rates in September, as they believe inflation is moving closer to the 2% target.

Policymakers, however, are seeking more conclusive data before making a decision. The speculation around Fed rate cuts increased following June’s Consumer Price Index (CPI) report, which revealed a return to disinflation.

Both annual headline and core CPI slowed more than expected, with monthly headline inflation declining for the first time in over four years. Additionally, easing conditions in the US labor market have further bolstered expectations for rate cuts.

On the data front, the Unemployment Rate increased to 4.1% in June, the highest level since November 2021. Initial Jobless Claims for the week ending July 12 reached 243,000, surpassing both the expected 230,000 and the previous week’s 223,000. This rise in claims suggests more people are seeking unemployment benefits than anticipated.

Therefore, the bullish US dollar amid rising unemployment and expectations of Fed rate cuts could weigh on the EUR/USD pair, potentially causing the euro to depreciate against the dollar.

ECB's Uncertain Rate Cut Outlook and Lower Growth Projections May Weaken Euro

On the EUR front, the ECB kept interest rates unchanged on Thursday, with President Christine Lagarde avoiding any firm commitment to future rate cuts.

However, ECB policymaker Francois Villeroy de Galhau indicated that markets expect two more rate cuts this year, with possible policy tightening starting in September and continuing in December.

The ECB’s Survey of Professional Forecasters revealed that price pressures are expected to remain around 2.4%, returning to 2.0% by 2025. The growth target for 2025 was revised down to 0.7% from the previous estimate of 0.5%.

Therefore, the ECB's uncertain stance on rate cuts and lower growth projections may weaken the euro, potentially leading to a decline in the EUR/USD pair as market expectations shift.

EUR/USD - Technical Analysis

The EUR/USD is currently trading at $1.08864, reflecting a modest decline of 0.07%. The 4-hour chart indicates critical levels that traders should monitor closely. The pivot point is set at $1.0920, serving as a key indicator for potential price movements.

Immediate resistance is identified at $1.0909, with subsequent resistance levels at $1.0928 and $1.0948. On the downside, immediate support is at $1.0861, followed by $1.0844 and $1.0825.

Technical indicators suggest a cautious sentiment in the market. The Relative Strength Index (RSI) stands at 42, indicating a slight bearish tilt but not yet in oversold territory. The 50-day Exponential Moving Average (EMA) is positioned at $1.0880, just below the current price, acting as a potential support level.

Given the technical setup, traders might consider placing a buy order above the 50-day EMA at $1.08805 to capitalize on potential upward momentum.

The suggested trade setup includes an entry price above $1.08805, a take profit target at $1.09199, and a stop loss at $1.08598. This strategy aims to leverage a rebound while maintaining a controlled risk profile.

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