EUR/USD Price Analysis – Sep 09, 2024
Daily Price Outlook
The EUR/USD pair is under pressure, trading below 1.1050 as investors brace for the European Central Bank (ECB) policy decision this Thursday.
The ECB is expected to cut its key borrowing rates by 25 basis points (bps) for the second time in its current policy-easing cycle, which started in June.
With Eurozone inflation continuing to decline—Harmonized Index of Consumer Prices (HICP) fell to 2.2% in August—further monetary easing appears almost certain.
Germany's technical recession, which saw its economy contract in the second quarter, adds to the mounting challenges.
ECB policymakers, including board member Piero Cipollone, have expressed concerns about the German economy's weakness and the risk of overly restrictive monetary policy, leading to the consensus for further rate cuts by year-end.
Weak Economic Sentiment and Worsening Investor Confidence
The Eurozone’s economic outlook remains bleak. Recent data showed that Sentix Investor Confidence dropped from -13.9 in August to -15.4 in September, reflecting growing pessimism about the region's economic health.
The German economy’s slowdown continues to drag down sentiment across the Eurozone, limiting the prospects for any meaningful recovery in the near term.
Subdued demand from domestic and international markets is further weakening the Euro, with EUR/USD failing to break key resistance levels as a result.
The Eurozone’s poor economic prospects, combined with lower inflation and weak investor confidence, have kept the Euro in a downward spiral against its peers.
US Dollar Strength After Nonfarm Payroll Data
Meanwhile, the US Dollar has strengthened, supported by a mixed US Nonfarm Payrolls (NFP) report for August.
While new payrolls were fewer than expected at 142K, the Unemployment Rate dropped as anticipated to 4.2%, and Average Hourly Earnings grew faster than projected at 0.4%.
The US Dollar Index (DXY), which tracks the USD against six major currencies, rose to near 101.50, helping push EUR/USD further below 1.1050.
The Federal Reserve (Fed) is now less likely to cut interest rates aggressively, with FedWatch Tool indicating a 27% probability of a 50-bps rate cut in September.
The market’s focus is now on the upcoming US Consumer Price Index (CPI) data due on Wednesday, which could introduce more volatility for EUR/USD.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10660, edging down by 0.06% as the market faces continued pressure. A weak Euro is struggling to find its footing, with the pair trading just below the pivot point at $1.1084.
With the 50-day Exponential Moving Average (EMA) sitting slightly lower at $1.1082, the pair remains technically bearish, unable to gather the strength needed for an upward breakout.
The RSI indicator stands at 41, reflecting neutral but leaning towards oversold conditions, further reinforcing a bearish sentiment in the short term.
Immediate resistance looms at $1.1121, followed by higher ceilings at $1.1154 and $1.1193. Without a decisive break above these levels, the Euro may continue to encounter selling pressure, particularly if broader economic concerns such as inflation in the Eurozone continue to cast a shadow over investor sentiment.
On the downside, immediate support can be found at $1.1034, with key levels further below at $1.1000 and $1.0969.
If the pair breaches the $1.1034 mark, it could quickly descend toward the psychologically significant $1.1000 level, which serves as a key defensive barrier. A breakdown below this threshold would likely trigger further declines, exposing the $1.0969 support.
The recommended strategy is to sell positions below $1.10836, with a target profit set at $1.10323. To protect against upside risk, a stop-loss should be placed at $1.11141, just above immediate resistance.
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