Technical Analysis

EUR/USD Price Analysis – May 13, 2024

By LonghornFX Technical Analysis
May 13, 20244 min

Daily Price Outlook

During the European trading session, the EUR/USD prolonged its upward rally and gained positive traction around the 1.0796 level, hitting the intra-day high of 1.0798. Traders interpreting that interest rate cuts from the European Central Bank (ECB) are expected to occur sooner and more aggressively than those from the Federal Reserve (Fed) might initially view this as positive news for the EUR.

The reason behind this perspective could be that the ECB's proactive measures to stimulate economic growth or address economic challenges might boost confidence in the Eurozone economy, thereby strengthening the EUR against other currencies.

On the other side, the US dollar is losing its traction despite the Federal Reserve's hawkish stance and speculation about delaying easing plans. However, the US dollar lost momentum on the back of a downbeat release of the University of Michigan Consumer Sentiment Index. Hence, the bearish US dollar helped the EUR/USD pair to stay bid.

US Dollar Strength and Federal Reserve's Stance Impact on EUR/USD Pair

On the US front, the broad-based US dollar continued its decline and remained under pressure following the disappointing release of the University of Michigan Consumer Sentiment Index. It dropped to 67.4 in May from April's 77.2, falling below expectations and hitting a six-month low. This weaker sentiment contributed to a decline in the US dollar.

While the University of Michigan Consumer Sentiment Index's disappointing release dragged down the US dollar, the currency found some support from the Federal Reserve's talk of delaying rate cuts. Some Fed officials, such as San Francisco Fed President Daly, want to keep policies tight to hit inflation targets, while others, like Atlanta Fed President Bostic, hint at possible rate cuts despite uncertainties. On the flip side, Dallas Fed President Logan is concerned about inflation and thinks it's too early to cut rates. Minneapolis Fed President Kashkari prefers a cautious approach, signaling that rate hikes to combat inflation would require a strong case.

ECB Rate Cut Expectations and Eurozone GDP Data

Another factor boosting the EUR/USD pair was the expectation that the European Central Bank (ECB) would cut interest rates more and sooner than the Federal Reserve (Fed). Traders are pricing in a 70 basis points reduction starting from June. Additionally, Eurozone Q1 GDP data, expected to show steady growth of 0.3% quarterly and 0.4% annually, will influence the Euro's performance.

This perspective suggests that because the European Central Bank (ECB) is taking proactive steps to stimulate economic growth or tackle economic issues, it increases confidence in the Eurozone economy. This, in turn, makes the Euro stronger compared to other currencies like the US dollar.

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

EUR/USD - Technical Analysis

The EUR/USD pair is currently trading at 1.07701, registering a modest increase of 0.03%. This slight uptick indicates a restrained optimism among traders as they navigate through prevailing economic indicators and market sentiment towards the Eurozone and the United States.

The pivot point for today's session is marked at 1.0806, directing the immediate market trajectory. Above this pivot, resistance levels are identified at 1.0812 and 1.0842, which need to be surpassed for a continued upward movement.

Conversely, the currency pair finds initial support at 1.0723 followed by a stronger foundation at 1.0700. Should the pair breach these supports, it could signal a bearish downturn to as low as 1.0671.

The Relative Strength Index (RSI) is currently at 54, suggesting a slightly bullish momentum but not entering overbought territory. This aligns with the current market price hovering near the 50-day Exponential Moving Average (EMA) of 1.0748, indicating a possible consolidation phase around these levels.

Considering the near alignment of EUR/USD with its 50 EMA and the moderate RSI, the pair shows potential for slight bullish behavior if it can sustain above the pivot point of 1.0806. Traders should consider buying above 1.07600, aiming for a take profit at 1.08060, while setting a stop loss at 1.07350 to manage risk effectively.

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