Technical Analysis

EUR/USD Price Analysis – June 12, 2024

By LonghornFX Technical Analysis
Jun 12, 20243 min

Daily Price Outlook

During the European trading session, the EUR/USD pair has showed a bullish performance, finding support near 1.0764 and edging higher to 1.0765 in the European session. Despite caution ahead of an eventful New York session and uncertainty surrounding the French elections, the pair has shown strength.

However, the drivers behind this upward trend is the anticipation surrounding the US Consumer Price Index (CPI) data for May and the Federal Reserve’s (Fed) interest rate decision.

ECB Policymakers Exercise Caution, Impacting EUR/USD Pair

On the EUR front, the shared currency gained traction as investors monitored the European Central Bank's (ECB) cautious approach to managing inflation and wage growth dynamics within the Eurozone. ECB officials, led by Governor Francois Villeroy de Galhau, have expressed confidence in the Eurozone's ability to return inflation to its 2% target next year.

However, they emphasize the need to navigate through short-term fluctuations in economic data. This prudent stance by the ECB has influenced market sentiment, notably impacting the performance of the EUR/USD pair.

The ECB is optimistic about inflation in the Eurozone eventually reaching its target of 2% but acknowledges the uncertainty and variability in economic indicators in the near term.

This cautious approach by the ECB has an impact on market sentiment, particularly on currency markets like the EUR/USD pair, as investors and traders adjust their expectations based on the central bank's guidance and economic outlook

US CPI and Fed’s Outlook Regarding Interest Rate Impact on EUR/USD Pair

On the US front, the overall US dollar has been gaining strength as investors become more confident in the economy. Expectations for a Federal Reserve interest rate cut in September are dwindling due to strong job market conditions and ongoing inflation.

This has pushed the US dollar to nearly a one-month high. Investors are now waiting for the latest US consumer inflation data and the upcoming FOMC monetary policy decision.

It's expected that the headline US Consumer Price Index will slightly ease to 0.1% in May from 0.3% previously, while the yearly rate is anticipated to stay at 3.4%, exceeding the Fed's 2% target.

Core CPI is also predicted to remain steady at 0.3% for the month and slightly decrease to a 3.5% yearly rate from April's 3.6%, indicating sustained inflationary pressure. Consequently, the Fed might consider a modest 25 basis points rate cut later in the year, potentially in November or December.

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

EUR/USD - Technical Analysis

The EUR/USD pair is currently trading at $1.07447, down 0.03% in today's session. The pivot point at $1.0766 serves as a critical level for today's market activity. Immediate resistance is found precisely at this pivot point, $1.0766, followed by $1.0798 and $1.0827. These resistance levels are essential to watch as they represent potential hurdles for any upward movement in price.

On the downside, immediate support lies at $1.0701, followed by $1.0674 and $1.0650. A breach below these support levels could signal a continuation of the bearish trend, putting further pressure on the euro.

Technical indicators offer a mixed view. The Relative Strength Index (RSI) is at 42, suggesting a slight bearish momentum. The 50-day Exponential Moving Average (EMA) is positioned at $1.0797, with the current price trading below this average, reinforcing the bearish sentiment in the short term.

Given the current technical setup, the outlook for EUR/USD remains cautious. An entry price for a buy limit order is suggested at $1.07248, with a take profit level set at $1.07664. To mitigate risk, a stop loss is recommended at $1.07005.

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