Technical Analysis

EUR/USD Price Analysis – May 03, 2024

By LonghornFX Technical Analysis
May 3, 20244 min

Daily Price Outlook

Despite the ECB being widely anticipated to start reducing interest rates in June, the EUR/USD currency pair maintained its upward trend and remained well bid around 1.0805, hitting the intraday high of 1.0812 level.

However, the reason for its upward trend could be attributed to the bearish US dollar and dovish Fed stance on interest rates.

The US Dollar (USD) is under pressure due to weak Q1 nonfarm productivity growth, and as the Federal Reserve (Fed) delivered less hawkish guidance on interest rates than feared.

In contrast to this, the European Central Bank is widely expected to reduce interest rates in June, which was seen as a key factor that capped further gains in the EUR/USD pair.

US Economic Developments and Impact on USD/EUR Pair

On the US front, the broad-based US dollar, as measured by the US Dollar Index (DXY), is trading near a three-week low around 105.20. Fed Chair Jerome Powell made cautious comments after the decision to keep interest rates steady at 5.25%-5.50%.

He signaled no plans for further rate hikes, which has led to the weakening of the US Dollar (USD). This "dovish" stance suggests the Fed is prioritizing economic growth over controlling inflation.

On the data front, US Initial Jobless Claims for the week ending April 26 remained steady at 208K, the lowest level in two months and below the expected 212K, which could give the Federal Reserve room to delay interest rate cuts. Meanwhile, US Nonfarm Productivity in the first quarter increased by 0.3%, lower than the anticipated 0.8% and the previous quarter's 3.5% rise.

This marks the slowest productivity growth since the January-March quarter in 2023. These figures suggest a stable job market but weaker productivity, which could impact the Fed's decision-making regarding monetary policy.

Therefore, the dovish stance of the Fed and weaker-than-expected US economic data have contributed to the weakening of the US dollar, supporting the upward trend of the EUR/USD pair.

Eurozone Economic Developments and Impact on EUR/USD Pair

On the Eurozone front, the European Central Bank is likely to lower interest rates in June, as long as inflation stays in check and remains on track to reach the desired 2% rate.

The hopes for the ECB achieving a smooth transition have grown, thanks to the Eurozone economy's stronger-than-expected performance, expanding by 0.3% in the first quarter of this yeaar, surpassing the anticipated 0.1% growth.

Hence, the anticipation of lower interest rates in June by the European Central Bank, coupled with the Eurozone's stronger economic growth, is likely to weaken the euro against the US dollar. Investors may favor the dollar due to potentially higher interest rates, leading to downward pressure on the EUR/USD pair.

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

EUR/USD - Technical Analysis

The EUR/USD pair shows a modest uptick in today's trading, rising by 0.08% to a price of 1.07308. This movement positions the currency pair just below a crucial pivot point set at 1.0752, indicating potential resistance and key levels to watch.

The Relative Strength Index (RSI) stands at 60, suggesting that the market is approaching overbought conditions, which could temper bullish momentum. Additionally, the 50-Day Exponential Moving Average (EMA) is currently at 1.0702, providing near-term support that aligns closely with today's market behavior.

In terms of resistance, the immediate hurdle for the EUR/USD pair is at 1.0753, closely followed by the subsequent levels at 1.0780 and 1.0809. These thresholds represent critical points where selling pressure might intensify, potentially capping further advances.

On the flip side, the currency finds robust support at 1.0673, with additional layers at 1.0638 and 1.0602. These levels could serve as bounce points if the pair retreats from its current price.

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