Technical Analysis

EUR/USD Price Analysis – Jan 22, 2024

By LonghornFX Technical Analysis
Jan 22, 20244 min

Daily Price Outlook 

The EUR/USD currency pair maintained its upward stance and gained significant traction around the 1.0899 level. The upward trend can be attributed to a combination of factors, including a bearish US dollar and the expected unchanged ECB interest rate in January, which may lead to stability for the EUR/USD pair in the short term. The European Central Bank's (ECB) January monetary policy meeting on Thursday will be closely watched by traders.

ECB Caution and Potential Rate Cuts Signal Impact on Euro (EUR)

The European Central Bank (ECB) is being cautious about making quick changes to financial conditions, and no policy changes are expected at their January meeting this Thursday. Traders are waiting for ECB President Christine Lagarde's post-meeting speech for insights, especially regarding possible interest rate cuts later this year.

Investors believe rate cuts might happen in the spring due to progress toward the 2% inflation target and tighter policy rates. The ECB's decision will be announced on Thursday. Also, on the same day, the US will release its preliminary Q4 Gross Domestic Product Annualized, and on Friday, the Commerce Department will share December data on the Personal Consumption Expenditures Price Index, an important measure for the Federal Reserve's inflation considerations.

Therefore, the cautious approach of the European Central Bank and potential interest rate cuts will likely lead to a weaker Euro (EUR) against the US Dollar (USD). Traders will closely monitor ECB decisions for currency movements.

Positive US Economic Data Weakens Expectations of Fed Rate Cut in March

Moreover, the recent positive US economic data, like Retail Sales and the Consumer Sentiment Index, has made markets less certain about the Federal Reserve cutting interest rates in March. Notably, the CME FedWatch Tool now indicates a 49.3% chance of a cut, down from 81% a week ago. The improved economic indicators are influencing these expectations, reflecting a more optimistic outlook for the US economy. Investors are closely watching for any shifts in the Fed's stance, as it can impact market sentiments and trading decisions in the coming weeks.

Therefore, the lowered probability of a March interest rate cut by the Federal Reserve, driven by positive US economic data, may strengthen the US Dollar (USD) against the Euro (EUR) in the EUR/USD pair.

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

EUR/USD - Technical Analysis

The EUR/USD pair inched up modestly by 0.06%, situating itself at 1.09033, as market participants exhibit cautious optimism. The pair's struggle to define a clear directional bias is reflective of broader market sentiment, which remains divided amid contrasting economic signals.

A meticulous examination of the chart reveals a pivot point stationed at $1.0903, a level that is currently acting as a juncture for potential price swings. Immediate resistance levels are arrayed at $1.0963, $1.1028, and $1.1086, each serving as a potential challenge to upward movements. Conversely, support is entrenched at $1.0839, with further cushions at $1.0781 and $1.0714, safeguarding against downward pressures.

The RSI indicator presents a neutral stance at 53, suggesting an even tug of war between the bulls and bears. The MACD's positive value (0.000590) against its signal (-0.000490) intimates a growing bullish undercurrent, potentially priming the pair for an ascent.

The 50-day EMA, stationed at $1.0891, hovers just below the current price, which could act as a threshold for the pair's short-term trajectory. This moving average, in conjunction with the pivot point, may serve as a strategic fulcrum for the pair’s future path.

In summation, the current technical landscape paints a picture of cautious neutrality for EUR/USD. Traders may consider a sell position below the pivot point at 1.09031, targeting a take-profit level at 1.08562, while placing a stop loss at 1.09292 to manage risk.

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