EUR/USD Price Analysis – Sep 02, 2024
Daily Price Outlook
During the early European trading session, the EUR/USD currency pair reversed its downward trend, turning bullish at around the 1.1071 level and reaching an intra-day high of 1.1078.
This shift is primarily due to renewed selling pressure on the US dollar, driven by increased market optimism and expectations of a dovish stance from the US Federal Reserve (Fed).
Additionally, comments from European Central Bank (ECB) Governing Council member François Villeroy de Galhau, who hinted at the possibility of a rate cut in the upcoming September meeting, are influencing the EUR. This potential ECB rate cut could put additional downward pressure on the Euro (EUR).
US Dollar Faces Renewed Bearish Pressure Amid Dovish Fed Expectations
On the US front, the broad-based US dollar has struggled to maintain its early bullish momentum, facing renewed bearish pressure amid growing market optimism and expectations of a more dovish Federal Reserve (Fed).
The CME FedWatch Tool indicates a 70% chance of a 25 basis point rate cut by the Fed at its September meeting. However, recent economic data has led traders to reconsider the probability of a significant rate cut this month.
On the data front, July's Personal Consumption Expenditures (PCE) Index rose by 2.5% year-over-year, matching the previous month's figure but falling short of the 2.6% forecast.
The core PCE Index, which excludes food and energy, increased by 2.6% year-over-year in July, in line with the prior reading but slightly below the anticipated 2.7%.
These results suggest that while inflation remains stable, it may not be weak enough to justify a more substantial rate cut by the Fed.
Therefore, the renewed bearish pressure on the US dollar, coupled with stable yet insufficiently weak inflation data, supports a bullish outlook for the EUR/USD pair. Market optimism and dovish Fed expectations could drive further gains for the euro against the dollar.
Potential ECB Rate Cut Could Weaken Euro Against US Dollar
On the EUR front, European Central Bank (ECB) Governing Council member François Villeroy de Galhau recently hinted at a possible interest rate cut. According to Bloomberg, he believes there are "good reasons" for the ECB to lower its key interest rates in September.
Villeroy de Galhau emphasized that taking action at the upcoming meeting on September 12 would be both fair and prudent. He suggested that adjusting rates now could be beneficial for the Eurozone's economic stability.
This potential rate cut is being considered to support growth and address any economic challenges facing the region.
Therefore, the potential ECB interest rate cut could weaken the Euro against the US Dollar as lower rates might lead to reduced returns on Euro-denominated assets, making the EUR less attractive compared to the USD, leading to a decline in the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10620, experiencing a slight gain of 0.02% in early trading. The currency pair is hovering near the pivotal level of $1.1070, which serves as a crucial point for determining the next directional move.
The 4-hour chart shows immediate resistance at $1.1101, followed by higher resistance levels at $1.1140 and $1.1189. A successful break above these levels could set the stage for further bullish momentum.
On the downside, immediate support lies at $1.1034, with additional support at $1.1000 and $1.0969. The Relative Strength Index (RSI) is currently at 42, suggesting that the pair is leaning towards a bearish bias but is not yet in oversold territory.
This implies that there may be room for additional downside movement if the pair fails to hold above the key pivot point at $1.1070.
The 50-day Exponential Moving Average (EMA), currently positioned at $1.1109, is acting as a resistance level, reinforcing the bearish outlook.
Given the current technical setup, traders might consider selling positions below $1.10831, with a potential target near the $1.10338 level.
Conversely, a break above $1.1101 could invalidate this bearish outlook, potentially paving the way for a rally toward $1.1140 and beyond.
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