EUR/USD Price Forecast: Minor Support at 1.1770 as Dollar Weakens
Original analysis by James Hyerczyk, via FXStreet. This extended version builds on the core findings of the original article to present a more comprehensive outlook for traders and investors monitoring developments in the EUR/USD currency pair.
The EUR/USD currency pair has recently moved higher, driven by a combination of weakening U.S. Dollar sentiment and improving risk appetite across financial markets. The pair is showing signs of maintaining upside momentum as it holds above key support levels, particularly near the 1.1770 area, which technical traders identify as a crucial short-term floor.
Market Overview
Over the past sessions, EUR/USD has benefited from broader macroeconomic dynamics. These include reduced demand for safe-haven currencies like the U.S. Dollar and increased speculation that the Federal Reserve may pause or slow its pace of monetary tightening. Meanwhile, economic data from the Eurozone has shown moderate resilience, supporting the euro in its climb from recent lows.
Key Drivers Supporting EUR/USD Strength
Several factors are providing underlying support for the euro against the dollar:
• Weakening U.S. Dollar: The U.S. Dollar Index (DXY) has declined as investors recalibrate expectations for further interest rate hikes by the Federal Reserve.
• Eurozone Economic Resilience: Despite ongoing concerns around inflation, energy markets, and monetary policy divergence, major economies within the Eurozone have reported stronger-than-expected industrial output and steady consumer sentiment indicators.
• Risk-On Sentiment: Global equity markets have experienced positive movements, prompting a risk-on trades environment. In this scenario, traders tend to sell the U.S. Dollar in favor of riskier currencies, including the euro.
• Yield Differentials: The gap between U.S. Treasury yields and European bond yields has narrowed slightly, particularly as European Central Bank officials lean towards a more hawkish posture.
Technical Analysis
From a technical standpoint, the bias for EUR/USD remains to the upside as long as the pair continues trading above the 1.1770 support level. Momentum indicators suggest a gradual buildup of bullish pressure, but resistance zones further up the chart will likely test any potential rallies.
Key Technical Levels
Support Levels:
• 1.1770: Minor but significant support zone. This level has held up well in recent pullbacks and corresponds with the 50-period moving average on the 4-hour chart.
• 1.1720–1.1750: Additional support from previous weekly lows. Beneath here, selling pressure could intensify.
• 1.1690: A breakdown below this level would shift the bias back to neutral or potentially bearish.
Resistance Levels:
• 1.1840: Short-term peak from an earlier rally. This level may act as the first barrier for bulls attempting to advance the pair.
• 1.1890: Prior resistance and Fibonacci retracement level. Breaking and closing above this price line would indicate strength and open the way to higher highs.
• 1.1920–1.1940: Long-term resistance area. Historically, sellers have stepped in at this zone.
Price Action Summary
The pair’s recent bounce from 1.1770 highlights the significance of this level. Price action shows a pattern of higher lows, suggesting accumulation by buyers. The slow grind upwards is characteristic of a market that is consolidating before a possible breakout.
Short-term momentum indicators are mildly bullish:
• The Relative Strength Index (RSI) is approaching the 60 mark on the 4-hour chart, which supports a bullish bias but also signals caution about potential overbought conditions.
• MACD histogram remains in positive territory and shows increasing upside divergence, a supportive sign for continued short-term gains.
Fundamental Backdrop
Federal Reserve Outlook
Market participants are closely watching signals from the Federal Reserve. Recent commentary from Fed officials has been less aggressive, with some members calling for patience before implementing additional rate hikes.
• Fed funds futures pricing suggests moderate expectation
Read more on EUR/USD trading.