Title: EUR/USD Remains Under Pressure as Bears Defend Key Resistance
Author: Adapted from original article by The Tradable
The Euro-Dollar (EUR/USD) currency pair is once again experiencing renewed selling pressure as it faces stiff resistance below a key level. On June 6, 2024, the pair showed signs of a bearish reversal after struggling to extend its upside momentum beyond the 1.0900 psychological resistance zone. Traders and investors are growing increasingly cautious as the market awaits further catalysts, including data from both the Eurozone and the United States.
This article provides a comprehensive analysis of the current market dynamics affecting EUR/USD, covering technical, fundamental, and sentiment aspects influencing the pair. It also presents what traders can expect going forward in the short to medium term.
Key Takeaways:
– EUR/USD is under renewed selling pressure, retreating from near-term highs.
– Sellers are defending the 1.0900 resistance level, making it a key psychological and technical area of interest.
– Market sentiment remains mixed, with traders awaiting further economic data to assess the trajectory of central bank policies.
– Daily and intraday chart patterns suggest weakening bullish momentum and potential for further downside.
– Traders are closely watching the Non-Farm Payrolls (NFP) report and key U.S. inflation data due later this week.
Technical Overview: Resistance Capping Bullish Momentum
EUR/USD failed to hold its ground above 1.0880 in the June 6 session and has since retreated toward lower support levels. This shift appears to reflect an overall lack of buying conviction among bulls.
Here are the key technical observations:
– The 1.0900 level serves as a strong horizontal resistance. Bulls have attempted to breach this area multiple times over the past few sessions but have consistently met selling interest.
– On the 4-hour chart, moving averages are starting to flatten out, indicating waning upside momentum.
– The pair is trading near the 50-period moving average, which now acts as immediate resistance.
– Momentum oscillators such as the Relative Strength Index (RSI) and MACD (Moving Average Convergence Divergence) show signs of divergence. While price action attempted higher highs, these indicators failed to follow, confirming a bearish divergence.
– A break below the support at 1.0820 could trigger a more sustained bearish move, bringing the next target around 1.0770 into play.
Short-Term Trading Range:
– Resistance: 1.0900, 1.0930, 1.0960
– Support: 1.0820, 1.0770, 1.0720
Fundamental Cues: Diverging Central Bank Outlooks
The broader theme for EUR/USD continues to revolve around diverging monetary policy expectations between the European Central Bank (ECB) and the Federal Reserve (Fed).
European Central Bank:
– The ECB is widely expected to maintain a dovish-to-neutral policy stance after a recent cut in interest rates.
– Inflation in the Eurozone has cooled somewhat, providing policymakers with more breathing room to implement accommodative measures without immediate concern for price instability.
– However, economic growth remains weak in key economies such as Germany and France.
– The market anticipates a pause or slow pace for further rate cuts depending on incoming inflation data in the Eurozone.
U.S. Federal Reserve:
– In contrast, the U.S. Federal Reserve remains cautious about inflation, and most officials are hesitant to signal imminent rate cuts.
– The latest readings from the U.S. Consumer Price Index (CPI) and labor market have come in hotter than expected, keeping the Fed on a wait-and-see path.
– Upcoming data, including the June Non-Farm Payrolls and CPI reports, will play a critical role in shaping market expectations for the next Fed move.
– Fed Chair Jerome Powell has reiterated the need to see sustained progress in inflation before considering easing of monetary policy.
Interest Rate Differentials:
– The policy divergence
Read more on EUR/USD trading.