EUR/USD Price Analysis – Oct 18, 2024
Daily Price Outlook
The EUR/USD currency pair managed to halt its downward trend and gained positive traction on Friday, recovering from a four-day losing streak to trade around the 1.0846 level, even reaching an intra-day high of 1.0849. The shared currency is working to maintain its footing as the recent rally in the US Dollar (USD) seems to have paused. The US Dollar Index (DXY), which measures the Greenback's value against six major currencies, is struggling to push above the immediate resistance level of 103.90.
However, the overall outlook for the EUR/USD remains bearish, with expectations of further interest rate cuts from the European Central Bank (ECB) likely to put additional selling pressure on the Euro (EUR). As market participants monitor these developments, the currency pair may continue to experience volatility in the days ahead.
US Dollar Weakens Amid Positive Economic Data and Political Uncertainty, Providing Opportunity for EUR/USD Recovery
On the US front, the broad-based US dollar is losing its traction, but its outlook remains strong after Thursday’s positive economic data showed the country’s resilience. Retail sales, a key indicator of consumer spending, increased by 0.4% in September, surpassing expectations. Meanwhile, initial jobless claims for the week ending October 11 fell to 241,000, lower than the anticipated 260,000, suggesting a stable job market.
In recent weeks, the US dollar has outperformed its major peers as traders have scaled back expectations for a larger-than-usual interest rate cut of 50 basis points by the Federal Reserve (Fed) in November. Strong economic data from September has eased fears of a slowdown, leading traders to anticipate more gradual rate cuts instead. The CME FedWatch tool indicates that traders are now pricing in two rate cuts of 25 basis points in November and December, potentially lowering interest rates to between 4.25% and 4.50% by the end of the year.
Looking ahead, investors are paying close attention to market expectations surrounding the upcoming US presidential elections. Currently, there is a tight race between Donald Trump and Kamala Harris, with Harris leading by 2.4 percentage points, according to FiveThirtyEight’s daily election poll tracker. This political landscape may influence market sentiment in the coming months.
EUR/USD Pair Faces Bearish Outlook Amid ECB Rate Cuts and Political Concerns
On the EUR front, the EUR/USD pair has seen a mild recovery on Friday after hitting a fresh 10-week low near 1.0800 on Thursday. Despite this slight rebound, the overall outlook for the currency pair remains bearish. The Euro (EUR) could face additional selling pressure as expectations grow for further interest rate cuts from the European Central Bank (ECB). Recently, the ECB cut its Deposit Facility Rate by 25 basis points to 3.25%, marking the second consecutive rate reduction and the third this year.
The ECB's recent actions reflect growing concerns about reviving economic growth, with officials expressing confidence that inflation is under control. In a press conference following the rate decision, ECB President Christine Lagarde did not provide clear guidance on potential interest rate moves in December. However, market participants are anticipating another 25-basis point cut at the last meeting of the year, which could further impact the Euro’s value.
EUR/USD – Technical Analysis
The EUR/USD pair is trading slightly higher today, up 0.11% at $1.08375. The market is hovering below the key pivot point at $1.0848, which serves as a critical level for short-term direction. Immediate resistance is seen at $1.0868, followed by higher resistance levels at $1.0892 and $1.0916. A break above these levels could signal further bullish momentum for the euro against the dollar, with buyers targeting the next resistance zones.
On the downside, immediate support is at $1.0811, with further support levels at $1.0794 and $1.0779. A sustained move below these support areas could push EUR/USD into a deeper correction, where a more bearish outlook would prevail.
The 50-day Exponential Moving Average (EMA) at $1.0877 is acting as a resistance level, keeping the euro in check. Meanwhile, the Relative Strength Index (RSI) is currently at 39, indicating mildly oversold conditions but not yet signaling a significant reversal. Given this context, traders are likely watching for a potential breakdown below the pivot point to enter short positions.
A selling opportunity arises below $1.08488, with a take-profit target set at $1.07941. A stop loss should be placed at $1.08766 to manage risk, as a break above the 50-day EMA would invalidate the bearish setup.
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