Technical Analysis

EUR/USD Price Analysis – Nov 27, 2023

By LonghornFX Technical Analysis
Nov 27, 20234 min

Daily Price Outlook

Despite the German economy experiencing a modest economic slowdown in the second half of the year, the EUR/USD currency pair continued its upward rally, maintaining a strong position around 1.2620 marks during the early European session on Monday. However, this upward trend can be attributed to the bearish US Dollar, which supported the EUR/USD pair. However, the upticks in the EUR/USD pair may be limited due to the challenges faced by the German economy.

Moving forward, traders seem hesitant to take strong positions, as they are awaiting key data releases. The focus will be on the German and Eurozone inflation data, along with US GDP data, as these factors are expected to provide fresh impetus to the market.

Germany's Economic Slowdown and its Impact on the EUR/USD Pair

It's worth noting that Germany's economy experienced a slight deceleration in the third quarter of the year. According to the latest data, there was a 0.1% contraction in quarterly Gross Domestic Product (GDP) and a 0.4% annual decline.

Meanwhile, European Central Bank Vice President Luis de Guindos highlighted that economic risks in Europe are leaning towards the downside. He also mentioned the potential for inflation to rise in the coming months but suggested that maintaining stable interest rates could contribute to its control.

Furthermore, Germany experienced a setback as its constitutional court declared the reallocation of unused debt from COVID-19 emergency funding to current spending plans unlawful. This ruling resulted in a 60 billion Euro gap in the government's budget, notably affecting climate policies.

Therefore, these factors could exert pressure on the Euro and pose challenges for the EUR/USD pair.

Recent Developments in US Financial Markets and Economic Indicators

Despite improvements in US Treasury yields, the US Dollar failed to stop its downward trend and still losing ground, while the 10-year US bond yield held firm at 4.49% for the fourth straight session. Hence, the bearish US dollar was seen as another key factor that helped the EUR/USD pair to stay bid.

Looking forward, discussions are underway regarding potential adjustments to the monetary policy by the US Federal Reserve in the upcoming year. However, recent statements from Fed officials have introduced some uncertainty.

On the data front, the S&P Global Composite PMI held steady at 50.7 in November. Nevertheless, the Manufacturing PMI experienced a slight dip, sliding to 49.4 from 50.0, falling below the expected 49.8.

On a more positive note, the Services PMI showed modest growth, reaching 50.8, up from the previous month's 50.6 and surpassing the anticipated 50.4.

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

EUR/USD - Technical Analysis

The EUR/USD pair, currently trading around 1.09 with a modest increase of 0.05%, reflects a cautiously optimistic market sentiment. This slight upward movement signifies a potential strengthening in the short term.

The pair's technical landscape is defined by key price levels: a pivot point at 1.0987, immediate resistances at 1.1033, 1.1100, and 1.1165, and supports at 1.0918, 1.0873, and 1.0806. These levels are crucial in determining the pair's short-term trajectory, with resistances testing the pair's ability to sustain an upward trend and supports offering potential rebound points in case of a decline.

The Relative Strength Index (RSI) stands at 64, suggesting a bullish sentiment without yet reaching overbought conditions. This indicator points towards potential room for further upward movement. The Moving Average Convergence Divergence (MACD) shows a neutral stance with both the MACD and signal lines at 0.00, indicating a balanced market with no clear direction in momentum.

The 50-day Exponential Moving Average (EMA) is at 1.0930, with the EUR/USD trading slightly below this level. This positioning suggests a tentative bullish trend, with the 50 EMA potentially acting as a short-term resistance.

Chart patterns do not present a clear directional bias, leaving the door open for various interpretations based on upcoming economic events and data releases.

Conclusively, the EUR/USD pair exhibits a cautiously bullish trend, particularly if it remains above the 1.0920 mark. The short-term outlook suggests the possibility of the pair testing the immediate resistance at 1.1033, contingent on maintaining the current momentum. This forecast, however, remains subject to change based on unfolding global economic dynamics and policy decisions.

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