Technical Analysis

EUR/USD Price Analysis – May 10, 2024

By LonghornFX Technical Analysis
May 10, 20243 min

Daily Price Outlook

Despite Fed rate-cut speculation and a bearish U.S. dollar, the EUR/USD pair failed to extend its upward rally, losing some gains and turning bearish around the 1.0781 level. It hit an intra-day low of 1.0772. The reason for this downward trend can be attributed to the dovish stance of the ECB, which is expected to deliver three rate cuts this year due to easing Eurozone inflation. This has put pressure on the shared currency and contributed to the EUR/USD pair's losses.

US Dollar Under Pressure Amid Economic Uncertainty and Potential Fed Rate Cuts

On the other hand, the U.S. dollar remains under pressure due to uncertainty surrounding the U.S. economic outlook. Recent signs of a weakening job market have raised expectations that the Federal Reserve might cut interest rates sooner than expected. This follows higher-than-expected Initial Jobless Claims in early May and a disappointing April Nonfarm Payrolls report, suggesting the economy is struggling due to high interest rates. However, some Fed officials, like Boston Fed President Susan Collins and Minneapolis Fed President Neel Kashkari, believe inflation pressures are still too strong for rate cuts.

The U.S. dollar is under pressure due to economic uncertainty, which could lead to further weakening if the Federal Reserve cuts rates. However, conflicting views on inflation among Fed officials may limit the extent of the dollar's decline. This uncertainty could create upward pressure on the EUR/USD pair.

Impact of ECB Rate Cut Expectations on the Euro and the EUR/USD Pair

On the Euro front, the European Central Bank (ECB) is expected to start cutting interest rates in June, undermining the shared currency. However, ECB policymakers are divided on whether to continue with rate cuts after June. Some, like the Bank of Greece Governor Yannis Stournaras, suggest there could be three rate cuts this year, including one in July, driven by signs of slower economic growth. The Eurozone economy grew by 0.3% in the first quarter, beating expectations. On the other hand, some officials, like Austria's central bank governor Robert Holzmann, are cautious about cutting rates too quickly, fearing it might be premature.

The mixed views among ECB policymakers create uncertainty, with the prospect of rate cuts generally leading to a weaker Euro. This could result in a bearish impact on the EUR/USD pair.

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

EUR/USD - Technical Analysis

Today, the EUR/USD trades slightly lower at 1.07777, marking a decrease of 0.05%. The pair's movements are subdued amid a mixed sentiment in the forex market, reflecting cautious investor behavior ahead of upcoming economic data releases.

On the downside, initial support lies at $1.06999, followed by more substantial levels at $1.06544 and $1.06125. These figures suggest potential areas where the price might stabilize or rebound during pullbacks.

The Relative Strength Index (RSI) is currently at 59, indicating a slightly bullish momentum but nearing the threshold of overbought conditions. The 50-Day Exponential Moving Average (EMA) at 1.07377 provides underlying support, aligning closely with the pivot point and suggesting a consolidation phase might be at play unless further catalysts drive market volatility.

The trading strategy for EUR/USD under the current conditions involves a cautious approach. Traders might consider a short position if the price moves below the threshold of 1.07844, aiming for a target at the pivot point of 1.07511, with a stop loss set at 1.08136 to mitigate risk.

This setup reflects the current resistance and support levels, offering a structured plan for navigating potential market movements today.

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