EUR/USD Price Analysis – June 24, 2024
Daily Price Outlook
Despite the preliminary HICP PMI report for June pointing to a slowdown in the Eurozone economy, the EUR/USD currency pair maintained its upward trend and remained well-bid around the 1.0731 level, hitting an intraday high of 1.0736.
However, the reason for its bullish bias could be linked to the bearish US dollar, which lost ground on the growing speculation that the Federal Reserve (Fed) will start reducing interest rates in the September meeting and may deliver two rate cuts this year.
This undermined the US dollar and contributed to the gains in the EUR/USD pair.
Furthermore, the upticks in the EUR/USD pair were bolstered after the Euro delivered an upbeat performance against its peers as investors digested political uncertainty in France ahead of the first round of legislative elections scheduled for June 30.
Impact of Fed Speculation and Economic Data on the USD and EUR/USD Pair
On the US front, the broad-based US dollar lost its traction and edged lower as risk appetite improved amid speculation that the Federal Reserve (Fed) might initiate interest rate cuts starting in their September meeting, with expectations of two cuts by year-end.
Despite strong preliminary US PMI reports for June showing robust economic activity, including a 26-month high in services and a three-month high in manufacturing, the dollar's earlier gains faded.
This shift in sentiment was driven by market interpretations of the Fed's increasingly dovish stance in response to easing inflationary pressures. Investors are now pricing in a higher likelihood of multiple rate cuts in 2024, causing US Treasury bond yields to decline and supporting higher gold prices.
On the data front, the US composite PMI for June edged up slightly to 54.6, signaling a strong end to the second quarter for the economy and marking its highest level since April 2022. Input prices moderated to 56.6 from 57.2, while output prices also slowed to 53.5, indicating some of the smallest increases in four years.
These figures suggest a balanced outlook for inflation despite robust economic activity. The combination of easing price pressures and strong PMI readings underpins expectations for the Fed to adopt a more accommodative monetary policy stance, influencing market dynamics and the dollar's recent performance.
Therefore, the improved risk appetite and expectations of Fed rate cuts weakened the US dollar, supporting the EUR/USD pair's upward movement amidst strong US PMI data and easing inflation concerns.
Impact of Political Uncertainty and Economic Data on the EUR/USD Pair
On the EUR front, the Euro showed resilience in Monday's session amid political uncertainty in France ahead of the first round of legislative elections on June 30. Despite a preliminary HCOB PMI report indicating a slowdown in the Eurozone economy with weaker-than-expected Manufacturing and Services PMIs, the Euro managed to perform well against its counterparts.
This performance was bolstered by market expectations of potential rate cuts by the European Central Bank (ECB) in response to the economic slowdown. Investors' focus on political developments in France and economic indicators continues to influence the Euro's movement in the currency markets.
Despite weaker economic data and political uncertainties in France, the Euro maintained strength against other currencies, including the US dollar. This resilience suggests market expectations of ECB rate cuts are influencing the EUR/USD pair's dynamics.
EUR/USD - Technical Analysis
EUR/USD is trading at $1.07094, showing no significant change. The pivot point is positioned at $1.06987, serving as a crucial indicator for the next potential moves. Immediate resistance levels are observed at $1.07217, $1.07356, and $1.07508.
These levels highlight potential upward targets, indicating a bullish sentiment if the price stays above the pivot point.
On the downside, immediate support is found at $1.06865, with further support at $1.06720 and $1.06553. These support levels are vital in preventing a sharp decline, offering traders key entry points for long positions.
The Relative Strength Index (RSI) stands at 52, indicating a neutral market sentiment. The 50-day Exponential Moving Average (EMA) is positioned at $1.07206, suggesting the current price is slightly below this average, which might act as a resistance level in the short term.
The technical indicators suggest a cautious bullish outlook for EUR/USD. Traders should consider a buy position above $1.06991, targeting a take profit at $1.07506. A stop loss at $1.06719 is recommended to mitigate potential losses.
Conclusion: The EUR/USD pair shows a potential bullish trend above the pivot point of $1.06987.
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