EUR/USD Price Analysis – Nov 01, 2024
Daily Price Outlook
Despite the positive Eurozone data, the EUR/USD currency pair struggled to maintain its upward momentum, declining from a fresh two-week high to around 1.0855 on Friday. This downturn can be attributed to a rebound in the US Dollar, fueled by upbeat US economic data.
Meanwhile, investors seem cautious ahead of the upcoming US Nonfarm Payrolls (NFP) and the ISM Manufacturing Purchasing Managers’ Index (PMI) data for October, set to be released in the New York session.
Conversely, the shared currency has performed well against other currencies, bolstered by faster-than-expected Eurozone GDP growth in the third quarter and inflation data that exceeded forecasts. These developments have led traders to reassess expectations regarding larger-than-usual rate cuts by the European Central Bank (ECB) at its December policy meeting. This reassessment has been a key factor in limiting deeper losses for the EUR/USD pair.
EUR/USD Outlook Amid Eurozone Growth and US Dollar Recovery
On the EUR front, the shared currency maintains its bullish trend but failed to keep the EUR/USD pair above its two-week high and lost traction due to a recovery in the US Dollar.
However, the shared currency has shown strong performance against other currencies, supported by several factors including faster-than-expected Eurozone GDP growth of 0.9% in the third quarter and higher-than-expected inflation. This have led traders to rethink their expectations for larger rate cuts by the European Central Bank (ECB) in December.
According to Eurostat, the Eurozone economy grew faster than last quarter, mainly thanks to a strong showing from Germany. This growth reduces the chances of an immediate economic downturn, though uncertainty remains ahead of the upcoming US presidential election.
If former President Donald Trump wins against current Vice President Kamala Harris, Eurozone exports may be affected, as Trump has proposed a universal 10% tariff on all nations, except China, which would face even higher tariffs. Additionally, inflation in the Eurozone increased to 2% in October, up from 1.7% in September, further supporting the euro.
Therefore, the stronger euro from positive GDP growth and rising inflation supports the EUR/USD pair. However, the US Dollar's recovery and potential trade tariffs from a Trump presidency create uncertainty, limiting the euro's ability to maintain gains above the recent high.
Impact of US Economic Data on EUR/USD Pair
On the US front, the broad-based US Dollar regained its ground as investors showed caution ahead of the upcoming US Nonfarm Payrolls (NFP) and ISM Manufacturing Purchasing Managers’ Index (PMI) data for October. Economists expect the US economy to have added 113,000 jobs, significantly lower than the 254,000 increase seen in September.
In the meantime, the unemployment rate is predicted to remain steady at 4.1%. These employment figures are crucial since they could affect market expectations about the Federal Reserve's interest rate decisions.
Traders are largely pricing in a 25 basis point rate cut at the Fed’s next meeting on Thursday. However, the NFP data could impact the outlook for the December meeting. If payroll data is stronger than expected, it may reduce bets on rate cuts, while weaker numbers could boost them.
Investors are also focusing on Average Hourly Earnings data for October, which is expected to show a 0.3% month-on-month increase, slower than September’s 0.4%. Additionally, the ISM Manufacturing PMI is projected to rise slightly to 47.6, indicating ongoing contraction but at a slower pace.
Therefore, the US Dollar's recovery, coupled with weaker-than-expected job growth forecasts, puts downward pressure on the EUR/USD pair. If the Nonfarm Payrolls data is strong, it could strengthen the Dollar further, leading to additional declines in the EUR/USD pair.
EUR/USD – Technical Analysis
EUR/USD is experiencing slight downward pressure, currently trading at $1.08743, a modest 0.08% decline. The pair hovers around the pivot point of $1.08881, which serves as a key indicator for short-term direction.
Immediate resistance is seen at $1.08992, and should this level be breached, the next resistance targets lie at $1.09105. A sustained break above these levels would likely signal stronger bullish momentum, potentially propelling EUR/USD further up.
Conversely, if the pair fails to rise above $1.08881, it could dip towards immediate support at $1.08611. Further downside targets include $1.08456 and $1.08315, where buying interest might emerge.
The RSI is currently at 54, suggesting a balanced momentum with no strong bias in either direction. Meanwhile, the 50-day EMA sits at $1.08580, providing additional support in the event of further declines.
Given the technical landscape, a tactical entry above $1.08701 could offer potential gains, targeting $1.08988 with a conservative stop loss at $1.08518. This setup offers an opportunity to capture gains if the euro stabilizes and tests higher levels.
This technical outlook suggests a cautiously bullish approach for EUR/USD, with close attention to the pivot point at $1.08881 as the key level that may determine near-term direction.
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