Technical Analysis

EUR/USD Price Analysis – March 04, 2024

By LonghornFX Technical Analysis
Mar 4, 20244 min

Daily Price Outlook

The EUR/USD currency pair managed to regain its strength, remaining well bid around the 1.0850 level. However, the upticks in the pair can be attributed to the bearish US dollar, which lost momentum due to downbeat US data and a less hawkish stance by the Federal Reserve. Furthermore, the ECB is waiting for more data on wage pressures before adjusting monetary policy and is expected to keep interest rates unchanged at its March meeting. Therefore, the ECB's cautious stance and potential hawkish comments could be positive for the euro currency against the US dollar.

ECB's Potential Hawkish Stance in March Meeting Could Boost Euro Against Dollar

On the Euro front, the European Central Bank (ECB) is waiting for more data on wage pressures before deciding on its next move regarding monetary policy. It's expected that at the ECB's upcoming meeting in March, interest rates will remain unchanged. Investors are keenly interested in the post-meeting press conference, as it will provide some clues on the ECB's future policy plans. If the ECB adopts a hawkish tone, signaling concerns about inflation, it will lead to a stronger Euro.

Therefore, the EUR/USD pair will likely face upward pressure if the European Central Bank (ECB) adopts a hawkish stance during its March meeting, indicating potential inflation concerns and strengthening the Euro against the US Dollar.

US Manufacturing Decline and Consumer Sentiment Weakness May Pressure US Dollar

On the US front, the Federal Reserve (Fed) is considering cutting interest rates, but the timing depends on how the economy is doing. Some Fed policymakers, like Susan Collins and John Williams, think the first rate cut could happen later this year. Raphael Bostic from Atlanta believes that a rate cut might be needed as soon as this summer. This indicates a dovish stance from the Fed, suggesting interest rate cuts to stimulate the economy. This weakens the US Dollar and contributes to the EUR/USD pair gains.

On the data front, the previously released data from the ISM survey indicates a sharper decline in US manufacturing activity for February than expected. This downturn is evident in the decrease of the ISM Manufacturing Index to 47.8 from January's 49.1, as well as a drop in the New Orders Index to 49.2. Additionally, employment in the sector hit a seven-month low, and the Prices Paid Index slightly declined to 52.5 from 52.9. Furthermore, the University of Michigan's Consumer Sentiment Index fell short, registering at 76.9 in February. These collectively highlight challenges in manufacturing and subdued consumer sentiment, reflecting broader economic worries.

Therefore, the negative data from the ISM survey, indicating a sharper decline in US manufacturing activity and subdued consumer sentiment, could weaken the US Dollar as investors become more cautious about the economy.

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

EUR/USD - Technical Analysis

The EUR/USD pair slightly increased by 0.06%, positioning itself at 1.08442, as it navigates through the complexities of current market sentiments and economic forecasts. This uptick is a testament to the currency pair's resilience amidst fluctuating market conditions, influenced by both domestic and international economic indicators.

The EUR/USD pair currently trades just above its pivot point of 1.0833, suggesting a potential for upward momentum if it maintains above this level.Immediate resistance levels are identified at 1.0866, 1.0895, and 1.0927. These levels represent critical junctures that could either cap gains or signal further bullish momentum upon a breakout.

Conversely, support levels at 1.0798, 1.0763, and 1.0731 provide a safety net against potential declines. These levels will be crucial for traders to monitor, as a breach could signify a shift towards a bearish market sentiment. The Relative Strength Index (RSI) stands at 56, indicating neither overbought nor oversold conditions, but rather a neutral market momentum. The 50-Day Exponential Moving Average (EMA) at 1.0822 slightly below the current price, further supports the notion of a potential bullish bias above the pivot point.

The EUR/USD pair shows signs of a cautiously optimistic trend, with a recommended entry price for buying set at just above the pivot point of 1.0833. A take-profit target is advised at 1.08672, with a stop-loss order at 1.08086 to mitigate risks. This trading strategy highlights a short-term opportunity for gains within a closely monitored risk management framework.



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