Technical Analysis

EUR/USD Price Analysis – June 7, 2024

By LonghornFX Technical Analysis
Jun 7, 20243 min

Daily Price Outlook

During the European trading session, the EUR/USD currency pair has shown a bullish trend in recent sessions, hovering around the 1.0895 mark and hitting an intra-day high of 1.0899. The upward trend can be attributed to several factors, including robust economic indicators such as the Eurozone's Harmonized Index of Consumer Prices (HICP) report, which revealed stronger-than-expected annual headline and core inflation figures.

Moreover, the shallow technical recession experienced by the Eurozone in the second half of the previous year has further bolstered optimism about the region's economic recovery, enhancing the attractiveness of the euro against the US dollar.

Fed Rate Cuts and Bearish US Economic Data Weigh on USD, Boost EUR/USD Pair

On the US front, the US dollar has been under pressure lately due to the possibility of rate cuts by the Federal Reserve, alongside gloomy economic data from the US. This has led to a boost in the EUR/USD pair. Meanwhile, the concerns about the health of the US labor market have been heightened by weak employment indicators, such as disappointing JOLTS Job Openings data, ADP Employment Change figures, and Initial Jobless Claims.

As a result, there's a growing anticipation that the Fed might resort to interest rate cuts in the coming months to spur economic growth and counteract the effects of weakening labor demand.

Traders are increasingly betting on rate cuts, as evidenced by the notable rise in the CME FedWatch tool, which now indicates a 68% probability of such action in September, up from the previous 54.5%. This heightened expectation has contributed to the weakening of the US dollar. Consequently, investors are turning to the euro as a favored alternative, resulting in a surge in the EUR/USD pair.

ECB Policy Easing and Inflation Outlook: Impact on EUR/USD Pair

On the flip side, the European Central Bank (ECB) has chosen to initiate a policy easing campaign, highlighted by a 25 basis point decrease in interest rates. This action could limit the upward momentum of the EUR/USD pair. The ECB's decision highlights its belief in the progress towards attaining its inflation target of 2%, as supported by recent data indicating a consistent decrease in inflation towards the desired level.

ECB President Christine Lagarde has underscored the ongoing struggle against inflation and emphasized the importance of vigilance in evaluating economic conditions. Despite upward revisions in inflation forecasts, the ECB maintains a cautious approach, recognizing uncertainties surrounding the economic outlook. This cautious stance, coupled with the absence of a clear interest-rate path, has introduced uncertainty in the forex market.

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

EUR/USD - Technical Analysis

EUR/USD is currently trading at $1.08947, marking a slight increase of 0.07%. The pivot point for today’s trading is at $1.08869, indicating a critical level for assessing market sentiment. Immediate resistance levels are positioned at $1.09148, $1.09425, and $1.09696. On the downside, immediate support can be found at $1.08544, followed by $1.08287 and $1.08108.

The Relative Strength Index (RSI) is currently at 58, suggesting a moderate buying interest without signaling overbought conditions. The 50-Day Exponential Moving Average (EMA) stands at $1.08612, providing a supportive base that aligns with the current price level, reinforcing the bullish outlook.

Considering the technical indicators and key price levels, the outlook for EUR/USD today appears bullish above the pivot point of $1.08869. Traders might consider an entry point to buy above $1.08873, targeting a take profit level of $1.09310 with a stop loss set at $1.08654. This setup offers a favorable risk-to-reward ratio of 1:2, with potential profits per standard lot at $437 and potential losses at $219. For mini lots, the profit and loss stand at $43 and $21, respectively.

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