Technical Analysis

EUR/USD Price Analysis – Nov 22, 2023

By LonghornFX Technical Analysis
Nov 22, 20234 min

Daily Price Outlook

During the early European session on Wednesday, the EUR/USD pair maintained its upward momentum and edging higher to around 1.0900 for the day. However, the driving force behind this upward movement can be attributed to the hawkish remarks delivered by ECB's Lagarde. These comments have offered some support to the shared currency and contributed to the EUR/USD pair gains.

Simultaneously, the US dollar is experiencing a decline in traction once again on this day, serving as another key factor contributing to the ongoing upward momentum of the EUR/USD pair.

USD Struggles and Uncertainties: Impact on EUR/USD Dynamics

The broad-based US dollar (USD), measured by the USD Index (DXY), is struggling to recover after a modest overnight bounce from a nearly three-month low, supporting the EUR/USD pair. The Federal Reserve's minutes hinted at maintaining higher interest rates to curb inflation, causing a brief rise in US Treasury yields and some short-covering in the USD on Tuesday.

However, market sentiment leans towards the Fed keeping rates steady, with expectations of a potential rate cut in the April 30-May 1 meeting. This belief is keeping 10-year US government bond yields low, limiting the Greenback's upside.

Factors Driving EUR/USD: Lagarde's Caution and Upcoming Economic Data

Another factor that has been boosting the EUR/USD pair is the recent positive comments from the European Central Bank (ECB) President Christine Lagarde. During a speech in Berlin, Lagarde adopted a cautious position regarding declaring victory over inflation.

She emphasized that it is too early to make such declarations and that placing bets based on short-term data would be premature. Thus, this cautious stance has caused investors to scale back their expectations of an immediate rate cut by the ECB, potentially in April.

Notably, the market initially expected a rate cut, but Lagarde's remarks have altered this perception. Consequently, traders are now hesitant to initiate new bullish positions on the EUR/USD pair.

Looking ahead, Investors expect Eurozone economic data on Wednesday. Meanwhile, the US weekly Jobless Claims, Durable Goods Orders, and the revised Michigan Consumer Sentiment Index will be in the spotlight. These, along with US bond yields and market sentiment, will likely impact USD demand and influence the movement of the EUR/USD pair.

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

EUR/USD - Technical Analysis

In the current forex market, the EUR/USD pair, as of November 22, exhibits a notable stability, trading at 1.09122. This flat movement reflects the complex interplay of economic narratives and policy decisions from the Eurozone and the United States. As the market navigates these influences, the technical indicators and key price levels offer insights into the pair's potential direction.

The pivot point for the EUR/USD pair is established at 1.0994, serving as a critical benchmark for short-term price movements. Resistance levels are observed at 1.1083, 1.1249, and 1.1411, each representing potential hurdles for an upward trend. Conversely, support levels at 1.0829, 1.0750, and 1.0585 are crucial for preventing downward momentum.

From a technical perspective, the Relative Strength Index (RSI) stands at 56, indicating a cautiously optimistic trend, as the pair has not yet reached overbought conditions. The MACD, at a neutral value of 0.00, suggests a balance in market momentum, with neither a clear bullish nor bearish dominance. Further, the pair's current position just above the 50-Day Exponential Moving Average (EMA) of 1.0922 suggests a slight bullish inclination in the short term.

Chart patterns, including candlestick analysis, signal a potential for bullish momentum, particularly if the pair maintains above its pivot point. This observation implies a readiness to test higher levels, provided the market sentiment remains favorable.

In conclusion, the EUR/USD pair's overall trend appears cautiously bullish above the 1.0899 level. The short-term expectation is for the pair to test the resistance at 1.1083. However, the forex market's dynamic nature calls for vigilance, as shifts in economic indicators and policy decisions could significantly impact the pair's trajectory. The upcoming days will be crucial in determining whether the EUR/USD can sustain its current position and challenge these resistance levels amidst evolving global economic conditions.

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