Technical Analysis

EUR/USD Price Analysis – April 03, 2024

By LonghornFX Technical Analysis
Apr 3, 20243 min

Daily Price Outlook

The EUR/USD currency pair has been showing bearish performance and facing downward pressure due to speculation surrounding potential rate cuts by the European Central Bank (ECB). Moreover, the previously released downbeat data was seen as another negative factor for the EUR/USD pair as it suggests softer inflation in both Germany and the Eurozone, raising expectations for an ECB interest rate cut, which puts downward pressure on the Euro. In contrast to this, the bearish US dollar was seen as a key factor that helped the EUR/USD pair limit its deeper losses.

Weaker US Dollar Offers Some Support:

Despite the bearish sentiment, the EUR/USD pair found some support from the weaker US Dollar Index (DXY), which dipped below the 105.00 mark. The softened stance of the US Federal Reserve, with expectations of easing beginning in the June meeting, contributed to the subdued performance of the greenback. Meanwhile, the comments from Fed officials, including Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly, indicating potential rate cuts in 2024, added to the pressure on the US dollar, providing a modest boost to the EUR/USD pair.

Eurozone and German Inflation Impact on ECB Policy and EUR/USD

On the data front, the German Harmonized Index of Consumer Prices (HICP) rose by 2.3% year-on-year in March, marking its lowest level since June 2021. This slight easing in inflation, falling slightly below market expectations, has raised concerns about the economic outlook in Germany and the Eurozone as a whole. The softer inflation data have fueled speculation of imminent interest rate cuts by the ECB, as Germany approaches the ECB's target inflation rate of 2.0%. Market participants are closely monitoring these developments as they weigh on the euro and create headwinds for the EUR/USD pair.

In contrast to the slight easing in German inflation, the Eurozone's annual Harmonized Index of Consumer Prices (HICP) rose by 2.4% in March, falling short of the forecasted 2.6% increase. This deceleration in inflation, coupled with a softer core HICP inflation rate of 2.9% year-on-year, indicates a moderation in price pressures within the Eurozone. On a monthly basis, while the bloc's HICP recorded a slightly higher increase compared to the previous month, the core HICP inflation softened.

Therefore, the ECB's struggle to meet its inflation goal could affect its policy decisions. This might cause volatility in the EUR/USD pair as investors react to economic data and bank announcements.

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

EUR/USD - Technical Analysis

On April 3, the EUR/USD pair exhibited a modest uptick of 0.06%, reaching a closing price of 1.07727. Key price levels played a significant role in shaping intraday movements, with the pivot point positioned at 1.07756. Immediate resistance levels were identified at 1.08044 and 1.08265, with subsequent hurdles at 1.08559. Conversely, immediate support was observed at 1.07481, followed by 1.07254 and 1.06948, marking essential levels to monitor for potential reversals.

Technical indicators provided mixed signals, with the Relative Strength Index (RSI) registering at 55, indicating a neutral stance. Meanwhile, the 50-day Exponential Moving Average (EMA) rested at 1.07730, aligning closely with the current market price. Notably, a downward channel presented resistance around the $1.0772 level, potentially influencing market sentiment.

The formation of a Doji candlestick pattern below the downward trendline could signal a shift towards a selling trend. Hence, a strategic entry point for traders might be selling below 1.07760, targeting a take-profit at 1.07314, while setting a stop-loss at 1.07994 to manage potential downside risks effectively.

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