EUR/USD Price Analysis – Oct 04, 2024
Daily Price Outlook
During Friday's European session, the EUR/USD currency pair continued its downward trend, turning bearish as it faced selling pressure around the 1.1030 mark, reaching an intraday low of 1.1020. The pair has edged lower, with the US Dollar (USD) maintaining its strength ahead of the upcoming Nonfarm Payrolls (NFP) report for September, scheduled for release at 12:30 GMT.
Investors are closely monitoring the NFP report, as it is expected to significantly influence the pace of the Federal Reserve's policy adjustments for the remainder of the year. Economists project that US employers added 140,000 new jobs in September, a slight decrease from 142,000 in August. Meanwhile, the unemployment rate is anticipated to remain stable at 4.2%.
Strong US Dollar and Inflation Concerns Weigh on EUR/USD Pair
On the US front, the US Dollar (USD) remains strong as traders await the Nonfarm Payrolls (NFP) report for September, set to be released at 12:30 GMT. The US Dollar Index (DXY), which measures the value of the dollar against six major currencies, is holding steady around 102.00 after a successful four-day streak. Traders have started to adjust their expectations for interest rate cuts by the Federal Reserve in November.
Recent data indicates that the likelihood of a 50 basis point rate cut has dropped from 53% to 33% in just a week. This shift comes after positive reports on employment from the ADP Employment Change and JOLTS Job Openings for August.
Moreover, concerns about persistent inflation are causing traders to reduce their bets on significant rate cuts by the Fed. The ISM Services PMI report for September revealed that input costs, measured by the Prices Paid component, unexpectedly rose to 59.4, indicating increasing inflationary pressures.
The overall Services PMI, which reflects activities in the service sector that makes up two-thirds of the economy, grew robustly to 54.9, surpassing estimates of 51.7 and the previous month’s figure of 51.5. These developments suggest that inflation may remain a key concern for the Fed moving forward.
This news has put additional pressure on the EUR/USD pair, as the strong US Dollar and reduced expectations for Fed rate cuts, combined with persistent inflation concerns, weigh on the euro, pushing the pair lower in the short term.
Euro Faces Pressure Amid Middle East Tensions and ECB Rate Cut Speculation
On the EUR front, the euro is under pressure due to worsening market sentiment, largely driven by escalating conflict in the Middle East. However, the tensions between Iran and Israel intensified after the killing of Hezbollah leader Hassan Nasrallah, which led to Tehran retaliating with ballistic missile attacks on military bases in Tel Aviv. This growing instability is weighing on risk-sensitive assets like the euro, adding to its recent decline.
At the same time, speculation about the European Central Bank (ECB) cutting interest rates at its upcoming meeting on October 17 is pushing the euro further down. In the meantime, the concerns about slower economic growth in the Eurozone and a drop in inflation, with the Harmonized Index of Consumer Prices (HICP) falling below the ECB's 2% target in September, are fueling these rate cut expectations.
ECB board member Isabel Schnabel, who has typically supported higher rates, acknowledged risks to economic growth in a recent speech. However, she remains optimistic that inflation will continue to drop toward the ECB's target, supported by weakening labor demand and progress in reducing price pressures.
This news is likely to exert downward pressure on the EUR/USD pair, as escalating geopolitical tensions and increasing speculation of ECB rate cuts contribute to a negative outlook for the euro, making the currency less attractive to investors.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10275, a slight dip of 0.02%, as the euro struggles to find direction amid a stronger US dollar. The pair is hovering just below its pivot point of $1.1039, signaling potential weakness ahead. Immediate resistance is seen at $1.1055, followed by $1.1066 and $1.1083. A break above these levels could trigger a bullish recovery, but the broader trend remains cautious as the 50-day Exponential Moving Average (EMA) at $1.1082 continues to cap upside momentum.
On the downside, immediate support is noted at $1.1017, followed by $1.1002 and $1.0984. A breach below $1.1017 could accelerate selling pressure, with the next target at $1.1002. The RSI stands at 38, suggesting a bearish bias, though not yet in oversold territory, indicating the pair still has room for further declines.
Traders might consider a sell entry below $1.10387, targeting $1.10072, with a stop-loss placed at $1.10550. This setup aligns with the ongoing bearish momentum, as the pair remains below key moving averages and continues to test lower support levels. A sustained move below $1.1017 would confirm further downside potential, possibly pushing the pair toward $1.0984.
In the near term, the outlook for EUR/USD is tilted to the downside unless we see a significant break above $1.1055, which could negate the bearish scenario and attract new buyers.
Related News
- GOLD Price Analysis – Oct 04, 2024
JOIN LONGHORNFX TODAY
24/7 live support, lightning fast withdrawals, guaranteed safe and reliable trading platforms with a true ECN broker.