EUR/USD Price Forecast: Bulls Aim for 1.18 as Soft Dollar Meets NFP and PMI Headwinds
Original Article by TradingNews.com
The euro continues to gain ground against the US dollar, with bulls setting their sights on the 1.18 resistance level. The EUR/USD pair has benefitted from recent weakness in the greenback, triggered by underwhelming economic data releases from the United States. With multiple macroeconomic factors aligning in favor of the euro, analysts project continued bullish momentum, provided key support zones remain intact.
This comprehensive analysis dives into the driving forces behind the recent euro strength, the state of the US dollar, technical indicators for EUR/USD, and what traders should watch for in the days ahead.
Current Market Conditions and Macro Drivers
The financial landscape is shifting as markets react to fundamental data coming out of both Europe and the United States. The following macro and economic developments are driving the EUR/USD upward motion:
• Dovish Signals from the Federal Reserve
– Recent commentary from Federal Reserve officials continues to emphasize a cautious approach to interest rate hikes.
– Softer inflation readings and labor market signals suggest limited urgency for further tightening.
– Futures markets are now pricing in a pause or gradual cut in rates sometime in the upcoming quarters.
• Underperforming US Economic Data
– PMIs (Purchasing Managers’ Indexes) have shown contraction, with recent services and manufacturing figures missing analyst expectations.
– The ISM Non-Manufacturing PMI indicates a cooling in the services sector, contributing to a dip in investor confidence.
– Initial jobless claims remain elevated, aligning with a slower labor market recovery.
• Anticipation Around Non-Farm Payrolls (NFP)
– Traders are closely monitoring the upcoming NFP report, which could confirm slowing job creation.
– A weaker-than-expected print could reinforce dovish Fed expectations and further pressure the dollar.
• Eurozone Economic Stabilization
– European inflation has begun to show early signs of trending downward, reducing the urgency for ECB action.
– Stabilization in the German industrial output and improved sentiment readings signal a potential turnaround for the euro area economy.
– The ECB has adopted a clearer trajectory for monetary policy, which adds a layer of predictability to the currency outlook.
EUR/USD Technical Outlook
From a technical standpoint, EUR/USD has breached several key resistance levels and now appears poised to challenge 1.1800 as the next major target. The pair has maintained a steady bullish trajectory since bouncing off support near 1.0650 in April.
Key technical factors currently supporting the bullish trend include:
• Price Action and Trend Strength
– The pair is trading above the 50-day and 200-day simple moving averages, indicating a strong upward trend.
– Successive higher highs and higher lows reinforce the bullish structure on the daily chart.
• Resistance and Support Levels
– Immediate resistance sits near 1.1780, the March high, followed by psychological resistance at 1.1800.
– A break beyond 1.1800 could open the door toward 1.1900 and eventually 1.2000 in the medium-term outlook.
– On the downside, support can be found near 1.1650, followed by 1.1580, which merges with the 50-day moving average.
• Relative Strength Index (RSI) and Momentum Indicators
– The RSI is trending just under overbought territory, suggesting bullish momentum may continue but traders should watch for temporary consolidations.
– MACD (Moving Average Convergence Divergence) continues to print in positive territory, further confirming upside momentum.
Investor Sentiment and Positioning
Investor sentiment has grown increasingly favorable toward the euro as the dollar loses steam. According to the latest CFTC (Commitment of Traders) report:
• Net long positions in the euro have risen over
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