Original Article by: Adam Tan
Source: Futu News
Link: https://news.futunn.com/en/post/60336847/1-17-resistance-ahead-eur-usd-enters-a-period-of
Rewritten Article (Expanded to over 1000 words):
EUR/USD Approaches 1.17 Resistance as Market Sentiment Shifts
The EUR/USD pair is currently undergoing a significant period of fluctuation as it draws closer to the crucial 1.17 level. The currency pair, widely recognized for its role as a barometer of global risk sentiment and macroeconomic policy divergence between the United States and the Eurozone, is showing signs of hesitation after a recent rally. Market participants are keeping a close watch on this psychologically and technically important resistance target, which may determine the pair’s trajectory in the short to medium term.
Author Adam Tan from Futu News recently provided a detailed analysis of the dynamics affecting the euro-dollar pair. In his coverage, Tan highlights the convergence of technical resistance, macroeconomic developments, and shifting expectations around interest rate policy that are currently shaping trading behavior in the FX market.
Let’s delve deeper into the key factors impacting the EUR/USD’s outlook as it navigates turbulent macroeconomic waters.
Recent Price Action and Technical Overview
– The EUR/USD pair has shown considerable resilience over the past few weeks, recovering from recent lows and trending steadily upward.
– The pair now finds itself pressing against the 1.17 level, which many traders and analysts regard as a formidable resistance point.
– Technical indicators suggest that momentum is starting to wane slightly, with the Relative Strength Index (RSI) approaching overbought territory.
– The EUR/USD rally has largely mirrored an environment of temporary USD weakness, as markets perceive a reduced likelihood of aggressive monetary tightening by the Federal Reserve.
Significance of the 1.17 Resistance Level
– From a technical perspective, 1.17 serves as a multi-month resistance level that has capped rallies multiple times since late 2023.
– A clear and sustained break above this level could pave the way for renewed bullish momentum, potentially targeting the next resistance around 1.1850.
– Conversely, failure to break through 1.17 convincingly may encourage bears to re-enter the market, potentially bringing the pair back towards the 1.15 zone.
Macro and Fundamental Drivers
A variety of macroeconomic and policy-driven forces are currently influencing the EUR/USD pair. These include:
US Macro Outlook and Dollar Performance
– Recent U.S. economic data has been mixed, lending a degree of uncertainty to the market’s outlook on future rate moves by the Federal Reserve.
– Inflation, while showing some signs of easing, remains above target. This moderates expectations for any substantial rate cuts in the near-term.
– Employment data has remained robust overall, a factor that continues to support the US dollar over the longer term.
– Nevertheless, dovish commentary from several Federal Reserve officials has prompted traders to reassess expectations for additional Fed rate hikes in 2024.
– The yield on US 10-year Treasuries has pulled back from recent highs, a development that traditionally exerts downward pressure on the greenback.
Eurozone Economic Conditions
– In the Eurozone, economic growth has been tepid, with persistent concerns around stagflation in key member states such as Germany and France.
– Inflation in the bloc has started to decelerate more consistently, strengthening expectations that the European Central Bank (ECB) could pause rate hikes or even begin easing later in the year.
– ECB President Christine Lagarde has maintained a cautious tone, pointing to downside risks and the potential need for monetary accommodation to support growth.
– Sentiment in the manufacturing and services sectors remains subdued, though there are early signs that economic conditions may be stabilizing slightly.
Impact of Interest Rate Expectations
– The difference in interest rate expectations between the US and the Eurozone forms one of the most important drivers of the EUR/USD pair.
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