Technical Analysis

EUR/USD Price Analysis – Oct 04, 2023

By LonghornFX Technical Analysis
Oct 4, 20234 min

Daily Price Outlook

Despite the strong US dollar, the EUR/USD currency pair is bouncing back after a two-day slide, hovering near a 10-month low reached on Tuesday. It's now trading higher around 1.0480 during early European trading on Wednesday. The rebound is thanks to better-than-expected Eurozone PMI data, which is boosting confidence in the Euro. However, Eurozone Retail Sales didn't fare as well, falling 2.1% YoY in August, worse than the expected -1.2%. This disappointing retail sales figure might limit the gains for the EUR/USD pair as it counters the positive impact of the PMI data.

EUR/USD Under Pressure Amid Fed's Rate Outlook

It's important to note that the EUR/USD pair is under pressure due to concerns about the US Federal Reserve's plans for interest rates. The US Dollar Index (DXY) has pulled back from an 11-month high it hit on Tuesday, and it's currently trading around 106.90. The US Dollar got stronger because of good US job numbers and higher yields on US Treasury bonds. The 10-year US Bond yield reached its highest level since 2007, reaching 4.85% on Wednesday. This was driven by better-than-expected US JOLTS Job Openings data, which showed there were 9.61 million job openings in August, beating expectations.

Furthermore, the Fed has a more aggressive stance on keeping interest rates up for a longer time, which is boosting confidence in the US dollar. Cleveland Federal Reserve President Loretta Mester even suggested they might raise rates at the next meeting if the economy stays strong. However, Atlanta Fed President Raphael Bostic took a more patient approach, saying there's no rush to change rates. Investors are waiting for more US job data, including the ADP report on Wednesday and the Nonfarm Payrolls report on Friday.

Eurozone Economic Highlights and ECB Outlook

On the Euro side, the positive Eurozone HCOB Purchase Manufacturing Index (PMI) data could offer some support for the Euro. The report for September showed that the Composite PMI improved slightly to 47.2 from the previous 47.1, which was expected to stay the same. German Composite PMI also inched up to 46.4 from 46.2 before, and the Services PMI increased to 50.3, surpassing the expected 49.8.

Thereby, the European Central Bank (ECB) is being careful about raising interest rates. Some officials are hopeful about inflation, while others, like ECB Chief Economist Philip Lane, are cautious. These different opinions show that the Eurozone's economic situation is uncertain and could affect the Euro's strength.

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

EUR/USD - Technical Analysis

The EUR/USD pair has exhibited a notable trajectory in the financial market as of October 04. Currently, the currency pair is trading around the 1.0501 mark, reflecting the intricate interplay of global financial factors and currency dynamics. From a technical standpoint, several pivotal price points have emerged. The pivot point for the pair is identified at 1.0501. On the bullish side of the spectrum, immediate resistance looms at 1.0551, with subsequent resistances identified at 1.05912 and 1.06601. Conversely, for potential downward shifts, immediate support is situated at 1.04505, succeeded by supports at 1.04015 and 1.03262.

Diving into the technical indicators, the Relative Strength Index (RSI) for the EUR/USD stands at 34. An RSI below 50 suggests a bearish sentiment, and with the current value being even closer to 30, it is inching towards the oversold territory. The 50-Day Exponential Moving Average (50 EMA) is marked at 1.055. With the current price of the pair being below this level, it indicates a short-term bearish trend. The 50 EMA is also offering resistance at this mark, further solidifying the bearish perspective.

From a chart pattern perspective, the observed downward channel suggests a selling trend for the pair. This sentiment is echoed by the 50-day EMA, which also advocates for a selling trend, further establishing the resistance around the 1.055 mark.

In terms of the broader trend, the prevailing sentiment for the EUR/USD pair appears to be bearish. Over the short term, market participants might look to adopt a strategy of selling below 1.055 and considering buy positions above this level. As always, it's crucial for traders and investors to stay updated with any fundamental news that might influence market dynamics and adjust their strategies accordingly.

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