Technical Analysis

EUR/USD Price Analysis – March 20, 2024

By LonghornFX Technical Analysis
Mar 20, 20243 min

Daily Price Outlook

The EUR/USD currency pair has been experiencing a downward trend and is currently trading around 1.0865, near multi-week lows. This trend can be attributed to the bullish US dollar, which has been gaining strength in the wake of expectations that the Fed will maintain its benchmark interest rate steady at its March meeting. However, the USD Index (DXY) is consolidating its gains near three-week highs, indicating a general preference for the USD among traders.

Despite positive sentiment in the Eurozone, particularly reflected in the improved ZEW Economic Sentiment, the euro struggles to gain momentum against a resilient dollar. Traders are being careful as they wait for the Federal Open Market Committee (FOMC) meeting this Wednesday. Most expect the committee to keep interest rates steady. Analysts believe Jerome Powell, the Fed Chair, will stress the need for clear signs of inflation before thinking about lowering rates. This belief has reduced speculation about rate cuts, making the USD more attractive.

Strong US Economic Data Reinforces Expectations of Fed's Higher Interest Rates

On the US front, the recent release of robust US consumer and producer inflation figures has reinforced speculations that the Federal Reserve (Fed) will adhere to its higher-for-longer interest rates narrative. These figures highlight a strengthening US economy and heighten expectations that the Fed will maintain its current interest rate levels, thereby supporting the US dollar.

Investors see the Fed's plan for higher interest rates as a sign that they believe in the strength of the US economy, even with global uncertainties. This makes the US dollar more appealing compared to the euro. As a result, the euro loses value against the dollar.

Eurozone Economic Sentiment Improves, but EUR/USD Momentum Remains Sluggish

Despite the Eurozone ZEW Economic Sentiment improving to 33.5 in March from the previous reading of 25.0, the EUR/USD currency pair failed to gain momentum. Similarly, economic expectations for Germany also improved, rising to 31.7 versus 19.9 prior. These positive indicators suggested a more optimistic outlook for the Eurozone and Germany as the improvements in Eurozone ZEW Economic Sentiment and Germany's economic expectations suggest a positive outlook for the Eurozone and Germany, which could generally be considered positive for the EUR currency.

Traders remained cautious ahead of the FOMC interest rate decision, opting to stay on the sidelines rather than actively trading the euro. Meanwhile, the Eurozone's economic sentiment reports provided a brief boost to sentiment but were overshadowed by the anticipation surrounding the FOMC meeting and its potential impact on the US dollar.

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

EUR/USD - Technical Analysis

In today’s technical outlook, the EUR/USD pair exhibited a marginal upward movement, registering a 0.05% increase to settle at 1.08705. The analysis of the 4-hour chart delineates a nuanced landscape for potential trading strategies, underscored by pivotal price levels that signal the pair's short-term trajectory.

The pivot point, situated at 1.08755, delineates the threshold between bullish and bearish territories. Resistance levels at 1.08996, 1.09297, and 1.09658 consecutively mark potential barriers where the pair's ascent might be contested. Conversely, support points at 1.08421, 1.07996, and 1.07622 represent zones where buyers could potentially reassert control, should the pair retreat.

Technical indicators further color the trading outlook; the Relative Strength Index (RSI) stands at 41, hinting at a bearish sentiment underpinning the current price action. Meanwhile, the 50-day Exponential Moving Average (EMA) at 1.08878 slightly overshadows the current price, suggesting a delicate balance between buyers and sellers, yet leaning towards a bearish bias.

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