Technical Analysis

EUR/USD Price Analysis – Sep 18, 2023

By LonghornFX Technical Analysis
Sep 18, 20233 min

Daily Price Outlook

During early European trading on Monday, the EUR/USD pair prolonged its upward rally and drew some further bids around the 1.0675 mark. However, this upward momentum can be attributed to disappointing consumer sentiment data from the United States (US) released the previous Friday. Furthermore, the pullback in US bond yields is putting downward pressure on the US Dollar (USD), contributing to the gains in the EUR/USD currency pair. It's worth noting that the potential for further upside in this major pair appears limited as investors await the Federal Reserve (Fed) interest rate decision scheduled for Wednesday.

Mixed US Economic Indicators Impact Dollar's Performance

According to the preliminary data, the US Michigan Consumer Sentiment Index for September dropped to 67.7, showing a decline from the previous reading of 69.5 and falling below the expected 69.1. The US Dollar Index (DXY), measuring the US Dollar against other major currencies, ended the week with a slight gain of 0.26%. However, the current price is lower, around 105.30. In addition, US Treasury yields have completely reversed their earlier gains, which is pressuring the US Dollar further. As of now, the yield on the US 10-year bond has dropped to 4.32%.

Furthermore, the previosuly released economic data from the US consistently showed that the economy is doing well. These strong signs make it more likely that the US Federal Reserve (Fed) will raise interest rates again by the end of 2023. The Consumer Price Index (CPI), which measures inflation, came in higher than expected. Retail Sales for the same month and Jobless Claims for the second week of September also showed good results, suggesting a positive outlook for the US economy.

Investors will keep a close eye on the Fed's interest rate decisions scheduled for Wednesday. While the Fed is expected to keep rates steady, people will be listening closely to what the central bank says, hoping to get hints about future rate changes.

ECB's Monetary Policy Stance and Potential Impact on EUR/USD

In contrast to the US, European Central Bank (ECB) President Christine Lagarde stated on Friday that the ECB is not considering cutting interest rates further. She also mentioned that the ECB plans to keep interest rates high for a while and might even raise them if necessary, showing a cautious but flexible approach. Hence, Lagarde's statement of no further rate cuts and potential rate hikes by the ECB can strengthen the Euro (EUR) against the US Dollar (USD), potentially boosting the EUR/USD pair.

EUR/USD Price Chart – Source: Tradingview
EUR/USD Price Chart – Source: Tradingview

EUR/USD - Technical Analysis

The EUR/USD pair is currently exhibiting a sideways movement, gravitating around the 1.0660 mark. It's noteworthy that the stochastic indicator shows waning positive momentum, transitioning into a negative overlap. This could potentially serve as a catalyst for the price to reinforce its bearish trajectory, targeting a break below 1.0635, which would further signal a descent towards the 1.0515 zone.

Consequently, our prevailing forecast leans towards a bearish outlook, underpinned by the downward pressure exerted by the EMA50. It's essential to underscore that a breach above 1.0685 might pivot the price towards an upward journey, aiming to touch 1.0725 and potentially stretching up to 1.0785 before considering any subsequent decline. The day's anticipated trading corridor is delineated between the support at 1.0570 and resistance at 1.0725, with the predominant sentiment for the day being bearish.



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