EUR/USD Weekly Outlook – Technical Analysis and Market Insights (Adapted from ActionForex by ActionForex.com)
The EUR/USD pair showcased a mixed performance over the past trading week, as investors digested a slew of economic indicators from both the Eurozone and the United States. Market participants continue to adjust their positions in anticipation of monetary policy shifts from the European Central Bank (ECB) and the U.S. Federal Reserve. As risk sentiment fluctuates and macroeconomic data points vary in strength, EUR/USD traders remain cautious heading into upcoming sessions.
Weekly Movement Summary
– The EUR/USD ended the week with a modest decline, closing near the 1.0770 support level.
– The pair initially attempted to extend its rebound but encountered resistance under the 1.0900 handle.
– Downward momentum gained traction mid-week on the back of stronger-than-expected U.S. economic data.
– Overall, the technical chart structure remains neutral to slightly bearish in the short term, pending clear directional confirmation.
Technical Analysis
Price Action Overview
– During the past week, EUR/USD engaged in a tug-of-war between bulls and bears but failed to confidently break out of its current established range.
– The pair reached as high as 1.0887 during the week but retraced this gain amid renewed dollar strength.
– The closing print near 1.0770 leaves the pair vulnerable to further downside pressure if bearish momentum intensifies.
Support and Resistance Levels
Key Support Zones:
– 1.0723: This is the immediate support level, marking a lower boundary of recent consolidation.
– 1.0694: A break below here would indicate potential for a larger decline, ending the current rebound from the 1.0600 region.
– 1.0600: The March 2024 low which acts as a significant support level for broader price action.
Key Resistance Zones:
– 1.0886: The high from the week and an important level to overcome for continued bullish advancement.
– 1.0915: A key resistance that aligns with the 61.8% Fibonacci retracement of the 1.1138 to 1.0600 decline.
– 1.0980: Marks a psychological benchmark that, if breached, could encourage a run toward the 1.1060 zone.
Technical Indicators
– Relative Strength Index (RSI): The daily RSI remains below 50, indicating that momentum remains slightly on the bearish side.
– MACD (Moving Average Convergence Divergence): The MACD signal line remains subdued with limited buyer conviction, supporting the idea of consolidation or continued weakness in the short term.
– Moving Averages: The 55-day EMA is acting as dynamic resistance around the 1.0880 level, while the 200-day moving average continues to converge near the 1.0840 zone.
Market Sentiment and Risk Factors
U.S. Economic Outlook
– Stronger-than-expected U.S. labor market and inflation data has strengthened the case for the Federal Reserve to maintain restrictive interest rate levels for a longer period.
– April’s CPI readings softened modestly, but PCE, the Fed’s preferred inflation gauge, remains elevated at levels above the central bank’s 2% target.
– As long as U.S. economic data holds firm, the dollar is likely to find support through higher yields and hawkish monetary policy expectations.
Eurozone Economic Climate
– Eurozone data continues to show signs of subdued growth, especially in manufacturing sectors.
– Services PMI has stabilized, but consumer confidence remains fragile amid inflation persistence and weak wage growth.
– Unlike the Fed, the ECB is seen as being closer to initiating rate cuts, with some analysts forecasting a potential easing as early as mid-2024.
Central Bank Divergence
– Diverging monetary policy expectations remain one of the most important themes influencing EUR/USD price action.
– The Fed is expected to remain on hold for now, possibly hiking if inflation re-accelerates
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