EUR/USD Price Analysis – Sep 20, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair extended its upward momentum, gaining strength around the 1.1180 level.
The Euro (EUR) is rallying, fueled by growing speculation that the European Central Bank (ECB) will keep its Deposit Facility rate steady at 3.5% during its October meeting.
Meanwhile, the US dollar (USD) is facing a bearish trend, which is contributing to the rise of the euro. The US Dollar Index (DXY), which measures the Greenback against six major currencies, remains just above its year-to-date low of 100.21.
This combination of factors is helping to bolster the EUR/USD pair as traders navigate the shifting economic landscape.
US Dollar Weakens Amid Fed Rate Cuts, Boosting EUR/USD Momentum
The US dollar has weakened following the Federal Reserve's recent interest rate cut, as expectations rise that the central bank will continue easing its policies.
The Fed recently reduced rates by 50 basis points to stimulate the labor market while inflation approaches its 2% target. According to the latest dot plot, Fed officials expect the federal funds rate to reach around 4.4% by the end of the year.
However, traders anticipate further declines, with predictions suggesting rates could drop by up to 75 basis points, potentially bringing them down to a range of 4.00% to 4.25%, as indicated by the CME FedWatch tool.
This suggests a more cautious stance from the Fed as it navigates a challenging economic environment.
Therefore, the Fed's interest rate cut and expectations for further easing have weakened the US Dollar, making the Euro more attractive. This has contributed to the EUR/USD pair's upward momentum, pushing it higher as traders react to the shifting economic landscape.
EUR/USD Gaining Momentum as ECB Signals Steady Interest Rates
On the EUR front, the EUR/USD pair is gaining momentum, aiming to break through the key resistance level of 1.1200 during Friday’s European session.
The Euro is strengthening amid growing speculation that the European Central Bank (ECB) will keep its Deposit Facility rate unchanged at 3.5% in the upcoming October meeting.
Some ECB officials have expressed a preference for a gradual approach to policy easing, seeking more evidence of a slowdown in inflation.
Recent comments from policymakers, including Peter Kazimir, Isabel Schnabel, and Joachim Nagel, suggest that price pressures are still above the bank's target.
Specifically, Isabel Schnabel highlighted that persistent inflation in the services sector is keeping overall inflation elevated. Investors are now looking forward to ECB President Christine Lagarde’s speech at 15:00 GMT for more insights on interest rates.
In her recent remarks at the ECB's press conference on September 12, Lagarde emphasized that future interest rate decisions will hinge on inflation assessments and incoming economic data.
She stressed the need to understand underlying inflation dynamics and the effectiveness of monetary policy before committing to a specific rate path.
As a result, the EUR/USD pair is likely to rise as the Euro gains strength from speculation of unchanged interest rates from the ECB. Positive sentiment from ECB officials and anticipation of Lagarde's speech could further support the pair's upward momentum.
EUR/USD - Technical Analysis
The EUR/USD pair is trading at $1.11650, up by 0.04%, maintaining a slightly bullish tone as it holds above the key pivot point at $1.1146. Immediate resistance is seen at $1.1181, with additional resistance targets at $1.1210 and $1.1241.
A break above these levels could indicate further upside potential for the euro, especially if market sentiment towards the U.S. dollar remains weak.
On the downside, immediate support is located at $1.1118, followed by $1.1094 and $1.1067. These levels could serve as key turning points if bearish pressure intensifies.
The 50-day Exponential Moving Average (EMA) at $1.1131 is providing near-term support, reinforcing the bullish bias as long as prices stay above this level.
The Relative Strength Index (RSI) currently stands at 58, suggesting that the market still has room to move higher before hitting overbought territory.
With the RSI not yet signaling overextension, there is potential for the pair to continue its upward momentum. However, traders should monitor any break below $1.1118, which could signal a deeper pullback or trend reversal.
In conclusion, the EUR/USD outlook remains bullish as long as the pair holds above $1.1146. A break above $1.1181 would confirm continued bullish momentum, while a fall below $1.1118 could lead to a bearish correction.
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