Technical Analysis

EUR/USD Price Analysis – April 01, 2024

By LonghornFX Technical Analysis
Apr 1, 20243 min

Daily Price Outlook

The EUR/USD currency pair has been facing a bearish trend and remained well offered around 1.0783 level, mainly due to the strength of the US dollar, which has been bolstered by several factors including the higher-than-expected US Core PCE (Personal Consumption Expenditures) data, showing a 0.3% month-on-month increase and a 2.8% year-on-year rise. These figures met market expectations, indicating a stable and robust economic environment in the United States.

Furthermore, the Federal Reserve's stance of maintaining interest rates at their current levels has provided support to the US dollar. The Fed left interest rates unchanged between 5.25% and 5.5%, with expectations of three quarter-percentage point cuts by the year's end. This confidence in the US economy and monetary policy has contributed to the US dollar's strength and kept the EUR/USD pair under pressure.

Renewed US Dollar (USD) Strength and Its Impact on EUR/USD Pair

On the US front, the renewed strength of the US dollar has played a major role in underpinning the EUR/USD currency pair. The US Dollar Index (DXY), which measures the dollar's value against a basket of major currencies, has been trading higher, currently around 104.52. The Federal Reserve's "higher-for-longer" stance has supported the US dollar, as it indicates a steady monetary policy that investors find attractive.

Traders are currently pricing in around a 55% probability of a first Fed rate cut in June, down from nearly 70% in previous weeks. This shift in market sentiment towards the US dollar has further contributed to the bearish performance of the EUR/USD pair.

European Central Bank (ECB) and Yannis Stournaras' Impact on EUR/USD Pair

On the Euro front, the European Central Bank (ECB) Governing Council member Yannis Stournaras recently commented on the possibility of four interest rate cuts in 2024, totaling a 100-basis-point reduction by year-end. This dovish outlook from the ECB has also weighed on the Euro, adding to the bearish sentiment surrounding the EUR/USD pair.

Stournaras' comments, along with other ECB officials talking about lowering interest rates have made people unsure and caused the Euro to drop in value. Market participants are closely monitoring developments in European economic data, including the German Consumer Price Index (CPI) and other indicators, to gauge the ECB's future policy actions and their impact on the EUR/USD pair.

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

EUR/USD - Technical Analysis

The EUR/USD pair experienced a slight decline on April 1st, with the price settling at 1.07905, marking a 0.06% decrease. The trading dynamics positioned the pair around a critical pivot point of 1.0804, with immediate resistance levels at 1.0840, 1.0866, and 1.0894, hinting at potential upward challenges. Support levels are distinctly placed at 1.0765, 1.0733, and 1.0695, which could provide a cushion for the pair in case of downward movement.

The technical analysis reveals a Relative Strength Index (RSI) of 42, indicating a neutral to slightly bearish market sentiment. An upward trendline breakout at the 1.0804 level could potentially initiate a selling trend, as the market responds to upcoming economic indicators and Federal Reserve communications. The 50-day Exponential Moving Average (EMA) at 1.0831 reinforces the significance of the 1.0804 pivot point, suggesting a cautious trading environment.

Given the current market conditions, a prudent trading approach would be to consider selling below 1.07904, aiming for a take-profit level at 1.07368, while setting a stop-loss at 1.08254.

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