EUR/USD Price Analysis – Nov 04, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair extended its upward trend, maintaining strong support around 1.0903 and reaching an intra-day high of 1.0905. This bullish momentum is primarily fueled by a strong Euro currency, which has gained traction following positive Eurozone economic data that alleviated concerns about significant rate cuts by the European Central Bank (ECB) in December.
Moreover, the rise in the EUR/USD pair accelerated as the US Dollar weakened amidst growing uncertainty ahead of the upcoming US presidential election on Tuesday and the Federal Reserve's monetary policy meeting on Thursday.
Euro Strengthens as Positive Economic Data Reduces Rate Cut Expectations
As we mentioned the bullish trend in the Euro currency has been backed by positive recent economic data from the Eurozone, which reduced expectations of large interest rate cuts by the European Central Bank (ECB) in December.
On the data front, the Eurozone’s economy grew faster than expected in the third quarter, with Gross Domestic Product (GDP) performing better than forecasted. This stronger-than-expected growth has led traders to scale back their expectations for a major interest rate cut of 50 basis points in December.
Furthermore, October’s inflation rate increased to 2%, further challenging the need for a steep rate cut by the ECB. Moreover, manufacturing in both Germany and the Eurozone improved, as shown by the final October PMI (Purchasing Managers' Index) data. In the meantime, Sentix Investor Confidence, a key sentiment indicator, also showed slight improvement, moving from -13.8 in October to -12.8 in November, though it remains in negative territory.
Therefore, the positive economic data from the Eurozone, along with reduced expectations for significant rate cuts, is likely to strengthen the Euro (EUR) against the US Dollar (USD). This could lead to upward momentum for the EUR/USD currency pair.
US Dollar Weakens Amid Election Uncertainty, Boosting EUR/USD Pair
On the US front, the broad-based US dollar edged lower on the day as uncertainty grows ahead of the US presidential election on Tuesday and the Federal Reserve's (Fed) monetary policy meeting on Thursday.
The US Dollar Index (DXY) fell below 103.70 as market participants anticipated a close race between former President Donald Trump and current Vice President Kamala Harris. However, the recent poll showed Harris leading Trump by three points in Iowa, which is significant since Trump won the state easily in the past two elections.
Traders think that if Trump wins, it could boost the US dollar and Treasury yields. This is because he wants to raise tariffs and cut taxes, which could lead to higher inflation and prompt the Federal Reserve to tighten its monetary policy.
On the other hand, if Harris wins, it is seen as a continuation of current policies, which would benefit risk-sensitive currencies. Regarding the Fed's upcoming meeting, traders expect a rate cut of 25 basis points, bringing rates down to between 4.50% and 4.75%.
Investors are also looking forward to the release of the ISM Services Purchasing Managers’ Index (PMI) for October, which is projected to show slower growth than the previous month.
Therefore, the US dollar's decline, driven by election uncertainty and expectations of a rate cut, is likely to support the Euro (EUR) against the US dollar (USD), pushing the EUR/USD pair higher.
EUR/USD – Technical Analysis
The EUR/USD pair is trading at $1.08958, up 0.59% on the day, as it moves just below a key pivot level at $1.09022. This pivot is a critical indicator for the pair’s potential direction. Immediate resistance lies at $1.09128, followed by higher resistance levels at $1.09231 and $1.09316.
A break above these levels would suggest continued bullish momentum, supported by an RSI reading of 61, indicating that the pair is approaching overbought territory. However, if EUR/USD manages to surpass the 1.09128 resistance, it could attract further buying interest.
On the downside, immediate support is found at $1.08845, with additional support at $1.08695 and a more substantial base at $1.08578, just above the 50-day Exponential Moving Average (EMA) of $1.08677.
The 50 EMA serves as a strong support level and could stabilize the pair if selling pressure increases. Current market sentiment remains influenced by the Eurozone’s economic outlook and dollar movements, with investors watching closely for cues from both the European Central Bank and the U.S. Federal Reserve.
Traders should consider the pivot point at $1.09022 as the deciding factor; a break below may signal selling opportunities, targeting $1.08770. Conversely, a sustained move above $1.09128 could reinforce a bullish trend, with the potential to reach higher resistance levels.
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