Technical Analysis

EUR/USD Price Analysis – May 22, 2024

By LonghornFX Technical Analysis
May 22, 20243 min

Daily Price Outlook

During the European trading session, the EUR/USD currency pair failed to garner support from market expectations that the ECB may provide further monetary stimulus to bolster the Eurozone economy. It is currently trading around the 1.0829 level, having hit an intraday low of 1.0822.

However, the downward trend is attributed to the bullish US dollar, which gained traction due to the hawkish stance of Fed officials. This stance was reinforced after Federal Reserve members cautioned that they need stronger evidence of easing inflation before considering interest rate cuts, indicating they are likely to maintain higher rates for an extended period.

Impact of ECB Interest Rate Uncertainty on EUR/USD Pair

On the EUR front, the currency is holding steady against the USD, as there is uncertainty about whether the ECB will continue its interest rate cuts after June. Some ECB policymakers, including Joachim Nagel, Klaas Knot, Pierre Wunsch, and Martins Kazaks, suggest a rate cut might happen in June but caution against further cuts too soon.

Nagel mentioned that while there might be short-term increases in inflation, overall, he expects inflation to keep declining towards the 2% target and reach it by 2025. This uncertainty and mixed signals are keeping the Euro supported but not significantly strengthening against the US Dollar.

Therefore, the uncertainty surrounding the ECB's interest rate policy and mixed signals from policymakers are keeping the EUR/USD pair steady, with the Euro supported but not experiencing significant strength against the US Dollar.

Impact of Federal Reserve's Cautious Stance on EUR/USD Pair

On the US front, the US dollar is on the rise, boosted by the Federal Reserve's cautious approach to interest rates. The Fed intends to maintain rates until there's solid proof that inflation will consistently hit the desired 2%. Despite progress in curbing inflation after a three-month halt, policymakers await more evidence before considering rate adjustments.

This stance has upheld the dollar's strength, although speculation about potential rate cuts beginning in September has tempered its gains. Investors now eagerly await the Federal Open Market Committee's minutes from the May meeting for further insight into the interest rate trajectory.

Therefore, the US dollar's upward momentum, driven by the Fed's cautious stance on interest rates, has kept the EUR/USD pair subdued.

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

EUR/USD - Technical Analysis

The EUR/USD pair is currently trading at $1.08538, showing no significant change from its previous close. The 4-hour chart highlights critical price levels and technical indicators, providing insights into potential market movements. The pivot point is set at $1.08614, serving as a key reference for traders.

Immediate resistance is noted at $1.08747, with subsequent levels at $1.08842 and $1.08951. These resistance levels are crucial for the bulls to overcome if they aim to push prices higher. On the downside, immediate support is observed at $1.08455, followed by $1.08355 and $1.08215.

These support levels will be vital for determining the market's next direction, especially if bearish sentiment prevails.

The Relative Strength Index (RSI) is currently at 44, indicating that the market is approaching oversold conditions, but not quite there yet. This level suggests that significant market movements could depend on breaking either the support or resistance levels.

Additionally, the 50-day Exponential Moving Average (EMA) stands at $1.08638, providing a dynamic support level that traders often use to gauge market trends.

The technical outlook for EUR/USD suggests cautious bearishness. An entry price below $1.08616 could present a selling opportunity, targeting $1.08359, with a stop loss set at $1.08725 to manage risk.

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