EUR/USD Price Analysis – Sep 18, 2024
Daily Price Outlook
During European trading, the EUR/USD pair remains steady above 1.1100, supported by ongoing weakness in the US dollar as traders anticipate the Federal Reserve's policy decision at 18:00 GMT.
Market sentiment is leaning towards a 50-basis-point rate cut by the Fed, which has contributed to the dollar's decline and boosted the EUR/USD pair.
However, the Euro faces some pressure due to uncertainty surrounding the European Central Bank's (ECB) future rate decisions and the overall economic outlook for the Eurozone.
Moving ahead, Eurostat will release the final Harmonized Index of Consumer Prices (HICP) for August at 09:00 GMT. Economists expect the data to align with preliminary estimates, forecasting annual headline inflation at 2.2% and core inflation at 2.8%.
US Retail Sales Data Creates Brief Rebound for Dollar, But Fed Rate Cut Expectations Weigh on EUR/USD
On the US front, recent economic data showed a small increase in Retail Sales for August, rising by 0.1% instead of the expected decline of 0.2%. However, sales excluding autos also grew by just 0.1%, missing forecasts.
This data led to a brief rebound in the US Dollar as traders adjusted their positions, moving it away from its lowest level since July 2023. Despite this, the US Dollar's gains were limited because traders still expect the Federal Reserve to cut interest rates more aggressively.
Markets are currently pricing in a 65% chance that the Fed will lower rates by 50 basis points at the end of its meeting today. This expectation is putting pressure on the US Dollar and supporting the EUR/USD pair.
Even though there was a slight bounce in the yield of the 10-year US government bond after the retail sales data, it did not significantly affect the market, as expectations for a more dovish Fed continue to dominate.
Uncertainty Over ECB Rate Decisions Drives Volatility in EUR/USD Pair
On the other side, the gain in the EUR/USD pair could be limited due to uncertainty about the European Central Bank's (ECB) future interest rate decisions and the Eurozone's economic outlook.
ECB officials are divided on whether to cut rates further. François Villeroy de Galhau, a member of the ECB Governing Council and President of the Bank of France, suggested that more rate cuts might be necessary to prevent inflation from falling too low. He indicated that the ECB is likely to continue cutting rates.
In contrast, Peter Kazimir, another ECB Governing Council member, argued that it might be better to wait until December for a clearer economic picture before making further rate cuts.
He expressed concerns about cutting borrowing costs too quickly if inflation has not been fully addressed.
Financial markets expect the ECB to make one more rate cut later this year, either in October or December, as they await more clarity on the economic situation.
Therefore, the uncertainty over ECB rate decisions is likely to keep the EUR/USD pair volatile. Divergent views among ECB officials create market hesitation, which may lead to fluctuating Euro strength against the US Dollar until a clearer policy direction emerges.
EUR/USD - Technical Analysis
EUR/USD is trading at $1.11258, up 0.11%, showing mild bullish momentum as it approaches key resistance levels. The pair is hovering above its pivot point at $1.1113, indicating that buying interest remains strong for the time being.
Immediate resistance is seen at $1.1135, followed by additional hurdles at $1.1155 and $1.1185. On the downside, the first support sits at $1.1094, with further levels at $1.1072 and $1.1049.
The RSI has reached 60, signaling that momentum is leaning toward the bullish side but is not yet overbought. The 50-day EMA is positioned at $1.1074, providing a solid foundation of support that reinforces a short-term bullish bias.
As long as the pair remains above this moving average, the outlook remains favorable for further gains.
Traders are likely focusing on upcoming economic data and central bank comments, as any shifts in sentiment could introduce volatility.
A break above $1.1135 would confirm the continuation of the uptrend, with a potential move toward the next resistance level at $1.1155. Entry points for buyers are recommended above $1.11134, with a take profit target at $1.11504 and a stop-loss placed at $1.10948.
However, should the pair fall below the $1.1094 support level, bearish sentiment could take hold, pushing the price further toward the next key support at $1.1072.
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