Technical Analysis

EUR/USD Price Analysis – Oct 11, 2023

By LonghornFX Technical Analysis
Oct 11, 20233 min

Daily Price Outlook

The EUR/USD currency pair managed to extned its upward rally and still showing positive momentum, hovering around 1.0610 level on Wednesday. However, the reason for its upward movement can be attributed to the weakening US Dollar, which was being pressured by the cautious comments from Federal Reserve officials, who are adopting a more dovish stance. Hence, the shared currency is gaining strength against the US Dollar. The US Dollar is becoming less valuable due to concerns expressed by Fed officials.

Fed Concerns and Upcoming Economic Data Impact on EUR/USD Pair

Federal Reserve (Fed) officials have recently voiced concerns about the potential challenges posed by higher long-term US bond yields on future interest rate adjustments. Atlanta's Fed President, Raphael Bostic, has expressed his view that the current monetary policy is already relatively restrictive, indicating that he doesn't see a necessity for further interest rate hikes.

As a result, the US Dollar has been on a downward trajectory, currently trading around 105.70. Despite the small recovery in US Treasury yields, the US dollar has been facing challenges. The 10-year US Treasury bond yield stands at 4.64%, which is slightly lower than previously. It is also worth noting that the decine in the US dollar began last week.

Investors are monitoring economic data, with attention to inflation indicators. Notably, the focus will be on the Producer Price Index (PPI) coming out on Wednesday, and the release of the FOMC meeting minutes and the Consumer Price Index (CPI) on Thursday. These reports will provide further understandings regarding the Fed's decision-making.

ECB's Caution and German Yields Impact on EUR/USD Pair

On the flip side, the rise in German bond yields was seen as a one of the key factor that hindering the upward momentum of the EUR/USD pair. This is due to anticipation that the European Central Bank will stop its interest rate hikes. These anticipation arise after the member of the European Central Bank, Francois Villeroy de Galhau, said that raising interest rates further is not the right thing to do for now.

During an interview with a French newspaper, ECB President Christine Lagarde said that the ECB's main interest rates are currently at a level that, if they remain there for some time, will help bring inflation back to the desired 2%. She's confident about achieving this target. Lagarde is also optimistic about Europe's gas reserves. Predictions indicate that Germany's inflation might slow down, which makes it less likely for the ECB to alter interest rates.

Therefore, this news could limit the EUR/USD pair's upward movement as expectations of the ECB pausing interest rate hikes and slowing German inflation may weigh on the Euro.

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

EUR/USD - Technical Analysis

The EUR/USD currency pair, as indicated by the 4-hour chart, is trading at 1.0605. It finds its pivot point at 1.05445. On the upside, immediate resistance stands at 1.06413, with further resistances at 1.06974 and 1.07942. Conversely, the pair sees support at 1.04907, with subsequent levels at 1.03939 and 1.03389.

The Relative Strength Index (RSI) records a value of 59.58, signaling a healthy bullish momentum without reaching the overbought territory.

The MACD, with a reading of 0.00048, is slightly below its signal line, marked at 0.00207, hinting at a potential pause in the bullish momentum.

Importantly, the EUR/USD's current price is perched above the 50-day Exponential Moving Average (EMA) of 1.05612, emphasizing its short-term bullish trajectory.

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