EUR/USD Price Analysis – Oct 02, 2023

Daily Price Outlook

During the early European session, the EUR/USD pair struggled to make significant gains and mostly hovered around the mid-1.0500s. However, the reason behind this was the growing belief that the Federal Reserve (Fed) might tighten its policies further, causing US Treasury bond yields to rise.

This, in turn, strengthened the US Dollar (USD) and weighed on the EUR/USD pair. Moreover, the possibility of the European Central Bank (ECB) postponing any additional interest rate hikes also weighed on the pair. On the flip side, a general risk-on sentiment in the market limited the demand for the safe-haven US Dollar, providing some support to the EUR/USD pair.

Market Sentiment Boosts EUR/USD, but ECB Rate Cut Speculations Linger

The global market sentiment is rising thanks to better-than-expected Chinese PMI data and the US government passing a temporary funding bill. This positive mood is keeping the US Dollar (USD) from surging and is giving some support to the EUR/USD pair. Conversely, many people think the European Central Bank (ECB) might cut interest rates in the future, keeping the Euro lower.

Recent data suggests that high inflation in the Eurozone might be slowing down, and there's even speculation about the Eurozone economy shrinking in the coming months. This has led to doubts about further ECB rate hikes, especially after the latest consumer inflation figures dropped from 5.3% to 4.5% in September.

US Dollar Strength Amid Fed's Tightening and Upcoming Data

The broad-based US dollar is generally strong because most believe the Federal Reserve (Fed) will keep tightening its policies. This makes the EUR/USD pair struggle to go up. The US PCE Price Index, a measure of inflation, increased as expected, showing a 3.5% rise in the past year through August.

However, the Core PCE Price Index, which the Fed prefers, eased slightly to 3.9% in August. Despite this, higher consumer spending and rising gas prices indicate that inflation will remain a concern. This means the Fed will likely stick to its tough stance, keeping interest rates high, which supports the US dollar and higher bond yields.

Looking ahead, traders seem cautious to place any strong bids as they are waiting for crucial US economic data coming at the start of the month. The week starts with the US ISM Manufacturing PMI release and a speech by Fed Chair Jerome Powell. These events will affect the US dollar's value and provide direction for the EUR/USD pair later in the North American session.

EUR/USD - Technical Analysis

The EUR/USD forex pair displays intriguing movements around the 1.0600 level, hinting at a mild bearish tilt. Yet, the stochastic indicator's positive momentum suggests possible bullish activity, targeting the 1.0675 region. However, any decline below 1.0550 could curb bullish prospects. Today's trading might range between 1.0520 support and 1.0660 resistance.

Technically, the 4-hour chart's pivot point is 1.0572, with resistances at 1.0658, 1.0739, and 1.0907; supports lie at 1.0488, 1.0405, and 1.0238. The RSI, at 45, shows neutrality leaning bearish.

The 50-Day EMA stands around 1.06082, potentially indicating the market's short-term trend. A notable downward trendline presents resistance at 1.0600; breaching this could change momentum. In summary, EUR/USD's short-term trajectory hinges on the 1.0600 mark, with a potential move towards the 1.0658 resistance if bullish momentum continues.