EUR/USD Price Analysis – Oct 14, 2024
Daily Price Outlook
The EUR/USD pair has extended its decline, hovering around 1.0920 in the early Asian session on Monday. This downward trend is largely fueled by rising risk aversion amid escalating geopolitical tensions in the Middle East and the ongoing conflicts between China and Taiwan, putting selling pressure on the Euro (EUR), which is considered a riskier currency.
Meanwhile, the Euro is feeling the heat from the European Central Bank (ECB), which is expected to cut interest rates further in its remaining monetary policy meetings this year. The ECB's dovish outlook is being reinforced by a faster-than-anticipated drop in Eurozone inflation and a 'fragile' economic recovery.
As these factors combine, the Euro faces significant headwinds, reflecting broader concerns in the global market and highlighting the interconnectedness of geopolitical events and economic policy decisions.
EUR/USD Under Pressure Amid Geopolitical Tensions and Rate Cut Expectations
As we mentioned, the EUR/USD pair has been under pressure, recently declining to around 1.0920 in the early Asian session on Monday. This drop is primarily due to rising risk aversion amid escalating geopolitical tensions in the Middle East and conflicts between China and Taiwan, which are weighing on the Euro (EUR), a riskier currency.
However, the spokesperson from the U.S. Department of State expressed serious concerns about the People's Liberation Army (PLA) military drills in the Taiwan Strait, indicating that the U.S. will closely monitor China's activities and coordinate with allies. Any further escalation in these tensions could lead to increased demand for safe-haven assets like the U.S. dollar (Greenback), putting additional pressure on the EUR/USD pair.
Traders are also anticipating a 25 basis point (bps) rate cut from the Federal Reserve (Fed) in November, following the release of the U.S. Producer Price Index (PPI) on Friday. The CME FedWatch Tool indicates that the market is now pricing in an 86.8% chance of this rate cut, up from 83.3% before the PPI data was released.
This shift in expectations further contributes to the bearish sentiment surrounding the Euro, as the prospect of lower interest rates in the U.S. tends to support the dollar against other currencies.
Euro Faces Pressure Amid ECB Rate Cut Expectations
Moreover, the Euro is experiencing pressure as the European Central Bank (ECB) is expected to cut interest rates further in its upcoming monetary policy meetings this year. This anticipated move stems from a recent and faster-than-expected drop in inflation across the Eurozone, which has raised concerns about the region's economic health.
The ECB's dovish stance is strengthened by a quicker-than-expected decline in inflation within the Eurozone and signs of a weak economic recovery. As inflation drops, the ECB is likely to lower rates to support growth, which could further weaken the Euro against other currencies. Overall, these factors contribute to a bearish outlook for the Euro, as traders respond to the changing economic landscape in Europe.
EUR/USD - Technical Analysis
The EUR/USD pair is trading at $1.09268, down 0.08% as it flirts with its immediate pivot point of $1.09220. The euro faces resistance at $1.09389, and a break above this level could trigger further bullish momentum toward the next resistance levels of $1.09522 and $1.09673.
On the downside, immediate support is found at $1.09135, with further support at $1.08997 and $1.08868, which will likely serve as key zones to watch if bearish pressure intensifies.
Technically, the 50-day Exponential Moving Average (EMA) at $1.09480 is providing strong resistance and could be a critical point in determining whether the pair moves higher or faces rejection. A failure to break above the 50-day EMA might suggest that further downside is likely in the near term.
The Relative Strength Index (RSI) is currently sitting at 44, indicating neutral momentum. This suggests that the pair has room to move in either direction, depending on upcoming market developments.
Traders may look to buy above $1.09221, with a take-profit target of $1.09492, aligning with resistance zones. A stop-loss at $1.09070 will help limit downside risk if EUR/USD slips below its immediate support level.
In conclusion, while EUR/USD remains in a neutral position, any break above or below the pivot point at $1.09220 will dictate its short-term direction. The pair’s ability to hold above or breach the 50-day EMA will be pivotal in determining its next move.
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