Title: EUR/USD Price Analysis: US Dollar Retracement Supports Euro Gains
Original Author: Anil Panchal via FXStreet
The EUR/USD pair saw an upward movement during the European trading session on Wednesday, November 6, 2024, driven by a broader correction in the US Dollar. Investors appeared to reassess positions after recent strength in the greenback, providing a window for the euro to recover some lost ground. A combination of technical factors and fresh market sentiment contributed to the bullish pressure on the currency pair.
Here’s a comprehensive analysis of the EUR/USD price action, touching on the key technical indicators, economic catalysts, and broader forex market dynamics that influence the exchange rate.
US Dollar Weakening Supports EUR/USD Upside
The US Dollar (USD) saw a mild retreat from recent highs, pushing EUR/USD higher as market sentiment shifted ahead of significant events on the week’s economic calendar. The retreat in the greenback comes after a multi-day advance driven by hawkish Federal Reserve expectations.
– The DXY (US Dollar Index), which measures the USD against a basket of major currencies, pulled back from its recent peak, offering bulls in the EUR/USD pair some breathing room.
– Market participants appear to be re-evaluating their stance on how aggressive the Federal Reserve will remain amid a softening economic backdrop.
– Traders also shifted capital allocations in favor of riskier assets, further weighing on the safe-haven US Dollar.
– Treasury yields in the United States edged lower, reducing support for the USD and promoting a near-term floor under the euro.
– A generally favorable risk sentiment allowed the euro to find support in the face of modest fundamental headwinds.
EUR/USD Technical Outlook: Short-Term Bullish Rebound?
Looking at the technical framework, EUR/USD showed signs of a bullish correction after earlier declines, trading above key short-term moving averages, suggesting temporary upside momentum could continue if resistance levels are broken.
– The EUR/USD pair bounced off support near the 1.0660 level, suggesting renewed buyer interest at that price region.
– The next potential upside target is 1.0730, a level acting as near-term resistance.
– Breaking above 1.0730 could open the door for a test of 1.0780, followed by a retest of the psychological 1.0800 handle.
– On the downside, immediate support remains at 1.0660, with a failure there exposing the pair to a renewed drop toward 1.0600.
– The 50-day Simple Moving Average (SMA) at 1.0700 is providing dynamic resistance, and a sustained close above this line could further solidify the bullish thesis.
Technical indicators also appear to be aligning with the prospects of a continued correction higher:
– The Relative Strength Index (RSI) on the four-hour chart has climbed above 50, pointing to increasing bullish momentum.
– MACD (Moving Average Convergence Divergence) signals are showing smaller red bars, suggesting waning bearish pressure and hinting at a potential crossover.
Market Drivers: Fed Policy, Eurozone Outlook, and Risk Sentiment
The recent EUR/USD price action is being guided by a combination of central bank expectations, macroeconomic indicators, and investor risk appetite. Here’s an outline of the primary influences affecting the currency pair:
Federal Reserve Outlook
– The Federal Reserve maintained a cautious stance in its latest policy statement, leaving interest rates steady but keeping future rate hike options on the table.
– Traders interpreted Fed Chair Jerome Powell’s comments as balanced, neither overtly hawkish nor dovish, prompting a recalibration of USD expectations.
– Economic data from the United States has been showing signs of moderation, with weakening job creation and consumer spending figures possibly pressuring the Federal Reserve to eventually pivot.
– Core PCE Price Index, the Fed’s preferred measure of inflation, is starting to ease, building a case for a potential pause or future policy loosening.
– A less aggressive Fed could keep US
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