Technical Analysis

EUR/USD Price Analysis – June 5, 2024

By LonghornFX Technical Analysis
Jun 5, 20244 min

Daily Price Outlook

During the European trading session, the EUR/USD currency pair failed to stop its downward trend and remained under pressure around the 1.0869 level, hitting the intra-day low of 1.0865.

However, the reason for its downward trend could be attributed to the fact that the ECB is widely expected to deliver a rate-cut move with a data-dependent approach for the interest rate path.

This tends to undermine the shared currency and contributes to the EUR/USD pair's losses. Furthermore, the bearish US dollar, driven by speculation that the US Federal Reserve will cut interest rates in September, was seen as one of the key factors that helped the EUR/USD pair limit its losses.

Looking forward, traders seem hesitant to take strong positions ahead of the release of US monthly employment details, the Nonfarm Payrolls (NFP) report on Friday. Meanwhile, the US ADP report on private-sector employment and the US ISM Services PMI will be in the spotlight.

Impact of Speculation on Fed Rate Cuts and Weak US Economic Data on EUR/USD Pair

On the US front, the broad-based US dollar dropped amid increasing speculation that the US Federal Reserve will cut interest rates in September. The CME FedWatch tool shows a 65% chance of a rate cut, up from 47% a week ago.

This shift follows a weak US ISM Manufacturing PMI report for May and downwardly revised Q1 GDP data, raising the likelihood of a Fed rate cut and impacting the dollar's momentum.

On the data front, the Job Openings and Labor Turnover Survey (JOLTS) revealed a notable decline in job openings, dropping by 296,000 to 8.059 million in April, the lowest in over three years. This, coupled with weak US ISM Manufacturing PMI data, implies a slowdown in the US economy.

The ADP report is anticipated to show a modest increase in private payrolls, with 173K compared to 192K in April. The ISM Services PMI is expected to slightly improve to 50.5, indicating growth.

Therefore, speculation of Fed rate cuts and weak US economic data are putting pressure on the US dollar, which is aiding the EUR/USD pair in limiting its losses.

EUR/USD Pair Under Pressure Ahead of ECB Rate Decision

On the EUR front, the declines in the EUR/USD pair were mainly bolstered by expectations that the ECB will deliver a rate-cut move with a data-dependent approach for the interest rate path.

Meanwhile, traders appear cautious ahead of the European Central Bank’s (ECB) interest rate decision this Thursday. Market watchers anticipate a 25 basis point cut in the Deposit Facility rate to 3.75%.

Investors are eager for clues about the ECB's future rate moves, especially given recent data showing a higher-than-expected rise in the Eurozone's annual Harmonized Index of Consumer Prices (HICP), service inflation, and Q1 Gross Domestic Product (GDP).

The ECB seems inclined to stay data-driven and delay further rate cuts, despite market expectations for two cuts this year.

Therefore, the cautious sentiment ahead of the ECB's decision is weighing on the EUR/USD pair, with investors closely monitoring for hints on future rate actions amidst signs of rising inflation and economic growth in the Eurozone.

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

EUR/USD - Technical Analysis

The EUR/USD pair is currently trading at $1.08776, virtually unchanged at -0.00% on the four-hour chart. The currency pair is showing signs of consolidation as it navigates through a narrow trading range.

Key price levels to monitor include a pivot point at $1.0860. Immediate resistance is located at $1.0915, with further resistance levels at $1.0943 and $1.0974. On the downside, immediate support is observed at $1.0829, followed by supports at $1.0811 and $1.0790.

Technical indicators provide a balanced outlook. The Relative Strength Index (RSI) is currently at 53, suggesting that the pair is in neutral territory with a slight inclination towards bullish momentum.

The 50-Day Exponential Moving Average (EMA) is positioned at $1.0853, providing a key support level just below the current price.

In the current market scenario, the recommended entry price for a buy position is above $1.08599. Traders should set a take profit target at $1.09036, aligning with the immediate resistance level, and place a stop loss at $1.08380 to manage potential downside risks.

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