Technical Analysis

EUR/USD Price Analysis – June 10, 2024

By LonghornFX Technical Analysis
Jun 10, 20244 min

Daily Price Outlook

During the European trading session, the EUR/USD currency pair continued its downward trend and remained under pressure around the 1.0744 level, hitting an intra-day high of 1.0782.

The upward trend could be attributed to political uncertainty in the Eurozone after French President Emmanuel Macron called for a snap election, which weighed heavily on the Euro.

In the meantime, the bullish US dollar, gaining traction following stronger-than-expected US Nonfarm Payrolls (NFP) data, was seen as another key factor keeping the EUR/USD pair lower. This dampened expectations of Fed rate cuts in September, pushing the US dollar higher and contributing to losses in the EUR/USD pair.

Impact of Eurozone Political Uncertainty and ECB Policy on EUR/USD Pair

On the EUR front, the shared currency weakened due to political uncertainty in the Eurozone after French President Emmanuel Macron called for a snap election following strong gains by Marine Le Pen's far-right National Rally in European parliamentary elections. Macron's decision raised worries about political stability, thereby exerting pressure on the Euro.

Meanwhile, ECB policymakers expressed concerns about persistent inflation, particularly in the service sector, which could slow down the central bank's policy-easing efforts.

Despite this, ECB President Christine Lagarde emphasized the bank's data-dependent approach, indicating that future interest rate decisions will be based on economic conditions, especially considering the possibility of volatile inflation in the coming months.

Impact of Strong US Jobs Data on Currency Markets and Monetary Policy

On the US front, the previously released stronger-than-expected Nonfarm Payrolls (NFP) data has lowered the chances of Federal Reserve (Fed) rate cuts this year. This has strengthened the US Dollar and contributed to gains in the EUR/USD pair.

The robust US employment report has reduced expectations of a Fed rate cut before September, with futures traders seeing almost no chance of this happening, which is likely to support the USD for now.

On the data front, the US Nonfarm Payrolls (NFP) report for May surpassed expectations, with 272K fresh jobs added compared to the anticipated 185K. This strong labor demand extends Fed policymakers' leeway to maintain current interest rates.

Furthermore, Average Hourly Earnings, a gauge of wage inflation, exceeded forecasts, with annual wage inflation accelerating to 4.1% from the expected 3.9%. Month-on-month, wage inflation also rose sharply by 0.4%, higher than the projected 0.3%.

These robust figures indicate growing pressure on household spending, impacting future monetary policy decisions by the Federal Reserve.

Therefore, the strong US job figures and reduced expectations of Fed rate cuts have bolstered the US Dollar, putting pressure on the GBP/USD pair. Investors are now focused on the UK employment data for May, due on Tuesday.

Meanwhile, the US Consumer Price Index (CPI) and the Fed's decision this week will be in the spotlight.

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

EUR/USD - Technical Analysis

The EUR/USD pair is trading at $1.07498, down 0.48% for the day. The 4-hour chart reveals a critical pivot point at $1.0798, which is essential for determining the pair’s short-term direction. Immediate resistance levels are at $1.0806, $1.0836, and $1.0872. On the downside, immediate support is seen at $1.0728, followed by $1.0701 and $1.0674.

Technical indicators provide a mixed view. The Relative Strength Index (RSI) is at 23, indicating that the pair is in oversold territory, which might suggest a potential rebound if broader market conditions align.

The 50-day Exponential Moving Average (EMA) is positioned at $1.08528, which is above the current price, suggesting that the immediate resistance could be reinforced by the EMA, making it a critical level to watch for any potential breakout or reversal.

For traders, the recommended strategy would be to set a buy limit at $1.07383, with a take profit target at $1.07977 and a stop loss at $1.07043.

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