EUR/USD Price Analysis – Oct 02, 2024
Daily Price Outlook
During the European trading session, the EUR/USD pair is trading slightly lower in the 1.1070s on Wednesday, following a sharp decline from 1.1135 on Tuesday. This downturn can be largely attributed to disappointing inflation data from the Eurozone. The Harmonized Index of Consumer Prices (HICP) reported a year-over-year increase of only 1.8% in September, a drop from 2.2% previously and below expectations of 1.9%.
Meanwhile, core inflation fell to 2.7%, slightly down from August’s 2.8%. These figures suggest that inflation is now trailing the European Central Bank's (ECB) target of 2.0%, raising concerns about the economic outlook. Consequently, the likelihood of further interest rate cuts by the ECB has increased, which could lead to capital outflows and exert additional pressure on the euro.
Impact of Eurozone Economic Data on EUR/USD Pair
As we mentioned, the previously released Eurozone unemployment rate has had a minimal impact on the pair, remaining steady at 6.4% in August, unchanged from July and in line with economists' expectations. However, the recent inflation figures have heightened concerns regarding the economic outlook in the region, suggesting that further ECB rate cuts could weaken the euro.
Moreover, the EUR/USD pair has faced additional downward pressure due to the strengthening US dollar, which rebounded sharply on Tuesday following positive job data. The JOLTS Job Openings report revealed an unexpected increase in job openings to 8.04 million in August, significantly above the revised figure of 7.71 million in July and exceeding expectations of 7.66 million.
This robust labor market data offsets weaker manufacturing activity in the US, as indicated by the ISM Manufacturing PMI, which remained in contraction territory for September.
Therefore, the steady Eurozone unemployment rate has done little to support the euro amid rising inflation concerns, while strengthening US labor market data, particularly the surge in job openings, has boosted the dollar, increasing downward pressure on the EUR/USD pair.
Geopolitical Tensions and Economic Indicators Weigh on EUR/USD Outlook
The recent sell-off in the EUR/USD pair has intensified, driven largely by escalating geopolitical tensions in the Middle East. Iran's recent missile strikes on Israel have prompted a surge in safe-haven investments, pushing traders toward the US dollar and putting further downward pressure on the EURUSD pair.
As we look ahead, traders will be keeping a keen eye on the US ADP Employment Change data for September, along with statements from Federal Reserve officials, for further clues about market direction. Additionally, the ongoing situation in the Middle East and its repercussions on global markets will play a crucial role in shaping future movements of the EUR/USD pair.
EUR/USD - Technical Analysis
EUR/USD is currently trading at $1.10651, down 0.02% in today’s session. The pair has struggled to gain traction, reflecting the broader uncertainty in global currency markets. After testing the $1.10832 resistance level earlier today, EUR/USD failed to break higher, suggesting that bearish momentum is still intact. The 50-day Exponential Moving Average (EMA) at $1.11405 continues to act as a strong resistance, capping further upside potential.
The Relative Strength Index (RSI) has dipped to 32, indicating bearish momentum and suggesting that EUR/USD could face additional downward pressure if it drops below 30. On the downside, immediate support is seen at $1.10461. A break below this level could accelerate declines toward $1.10254 and $1.10051. Conversely, for a bullish reversal to take hold, the pair must decisively break above the pivot point at $1.10695 and test the resistance levels at $1.10832 and $1.10952.
Short-term technical indicators suggest that EUR/USD may experience further declines if it fails to regain ground above $1.10695. The pair remains under selling pressure, with an entry below $1.10694 offering potential profit at $1.10453. Traders should watch for a move above $1.10832 to signal a potential bullish reversal.
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