EUR/USD Price Analysis – July 29, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair extended its downward movement, hovering around 1.0833 and reaching an intra-day low of 1.0826. This decline is primarily driven by the renewed strength of the US dollar, which has gained traction amid uncertainty surrounding the Federal Reserve's upcoming monetary policy decision.
Meanwhile, the losses in the EUR/USD pair was further bolsoterd by the sluggish economic growth in the Eurozone, especially in Germany, and expectations of rate cuts by the European Central Bank (ECB). These elements have collectively exerted significant pressure on the EUR/USD pair.
Impact of US Dollar Strength and Fed Policy on EUR/USD Outlook
On the US front, the broad-based US dollar strengthened, with the US Dollar Index (DXY) climbing to around 104.50.
The Federal Reserve is anticipated to maintain interest rates at 5.25%-5.50%, and investors are closely monitoring the Fed's monetary policy statement and Chair Jerome Powell’s press conference for indications of potential rate cuts.
Market experts speculate that the Fed may signal rate cuts in September, given the progress in reducing inflation toward the 2% target and rising concerns about the labor market. Recent data reflects easing inflation worries, with the Q2 GDP Price Index falling to 2.3% from 3.1%.
Although the June core Personal Consumption Expenditures (PCE) Price Index edged up to 2.6%, expectations for rate cuts persist.
Therefore, the strengthening US dollar and potential Fed rate cuts are likely to pressure the EUR/USD pair further. As the US dollar gains strength and inflation concerns ease, the EUR/USD may continue its downward trend.
EUR/USD Decline Amid Eurozone Inflation Uncertainty and Fed Decision
On the EUR front, the major currency pair is declining due to uncertainty ahead of the Eurozone’s preliminary Harmonized Index of Consumer Prices (HICP) for July and the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
The Eurozone inflation data will reveal if the market’s expectation of two more rate cuts by the European Central Bank (ECB) this year is justified.
Some ECB officials support these cuts due to a weak economy and the belief that inflation will drop to 2% next year. The expected annual inflation rates are 2.3% for overall prices and 2.8% for core prices.
Additionally, German Finance Minister Christian Lindner has introduced tax cuts to help boost spending and investment, as Germany is facing reduced demand and slower economic growth.
Therefore, the EUR/USD pair is falling as investors anticipate the Eurozone’s inflation data and the Fed’s policy decision. Uncertainty over ECB rate cuts and slower inflation, coupled with German tax relief measures, is contributing to the pair's decline.
EUR/USD - Technical Analysis
EUR/USD is currently trading at $1.08369, up 0.04% on the 4-hour chart. The pivot point is set at $1.0836, a critical level for determining future price movements. Immediate resistance levels are $1.0877, $1.0912, and $1.0949. On the downside, immediate support is at $1.0806, followed by $1.0777 and $1.0753.
The Relative Strength Index (RSI) is at 40, suggesting a neutral market with no clear overbought or oversold signals. This indicates that the market could move in either direction, influenced by upcoming economic data and market dynamics.
The 50-day Exponential Moving Average (EMA) stands at $1.0878, acting as a higher resistance level. If prices move above this EMA, it could indicate a shift towards a bullish trend. Conversely, staying below this EMA would reinforce a bearish outlook.
Given the current technical indicators, a cautious approach is advisable. Selling opportunities might arise below the pivot point of $1.0836, with a potential take profit level at $1.07765. A stop loss should be placed at $1.08720 to manage risk. The RSI's neutral position means traders should watch for any significant moves that could signal a clearer trend direction.
In summary, while EUR/USD shows some potential for upward movement, key resistance and support levels will be crucial in determining the next significant price actions.
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