Technical Analysis

EUR/USD Price Analysis – Feb 05, 2024

By LonghornFX Technical Analysis
Feb 5, 20243 min

Daily Price Outlook 

The EUR/USD currency pair failed to stop its bearish bias and experienced some further selling pressure around the 1.0768 level during the early European trading hours on Monday. However, the reason for its downward trend can be attributed to the bullish US Dollar, which was being backed by the hawkish stance by the Federal Reserve (Fed) Chair Jerome Powell. Apart from this, the risk-on market sentiment, backed by the previously released upbeat US data, was seen as another key factor that boosted the US dollar and contributed to the EUR/USD pair losses.

Powell's Cautious Stance and Positive US Indicators: Impact on EUR/USD Bearish Trend

It is worth noting that Federal Reserve Chairman Jerome Powell mentioned on Sunday that a rate cut in March is too soon because the Federal Open Market Committee (FOMC) is not confident in inflation reaching a sustainable 2%. Powell stated that while rate cuts are expected this year, they want to be open to the possibility of reducing rates starting in spring.

In terms of economic indicators, Nonfarm Payrolls (NFP) increased by 353K in January, surpassing expectations. Meanwhile, the Unemployment Rate held steady at 3.7%. Wage growth showed improvement, with Average Hourly Earnings rising by 4.5% YoY in January.

Therefore, the powell's cautious stance on rate cuts and positive US economic indicators, including robust job growth and wage increases, strengthened the US dollar. This, combined with uncertainties, likely contributed to a bearish 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 is threading through a descending channel, presently hovering slightly over the pivotal support at $1.0777. This particular juncture is pivotal, doubling as the lower edge of the trading channel. Should the pair retreat, support might be encountered at $1.07443 and $1.07157, marking potential inflection points.

Confronting upward momentum, the pair is met with resistance at the channel's boundary, with $1.08437 as the initial barrier. Further resistance is projected at $1.08935, a point of previous market friction, which may stall an ascent.

The RSI indicates a possible pivot in market sentiment, resting at 46.80. The appearance of bullish candlestick patterns at this RSI value hints at waning bearish control, potentially clearing the path for upward movement should the currency sustain above the pivot level.

Despite the 50-day EMA suggesting a downtrend, the current market behavior near the pivot point might imply underlying bullish prospects. Thus, the EUR/USD presents a case for a bullish tilt, warranting a buy stance if it steadies above the $1.07715 threshold.

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