This article is a rewritten version of “EUR/USD Rebounds Modestly While USD/JPY Targets More Gains” by ActionForex.com, originally authored and published on ActionForex. It has been restructured and expanded for a deeper analysis, extending it to more than 1000 words, and includes bullet points for clarity.
Title: EUR/USD Sees Modest Recovery While USD/JPY Aims for Further Momentum
The forex market continues to exhibit dynamic volatility, particularly in the major currency pairs. The EUR/USD pair shows signs of modest recovery, though underlying bearish pressure persists, while the USD/JPY pair remains poised for further gains driven by stronger dollar sentiment and persistent divergence in monetary policy expectations between the Federal Reserve and the Bank of Japan.
Market Overview: Diverging Forces Shape EUR/USD and USD/JPY
Forex markets are currently influenced by several macroeconomic and technical factors:
– Interest rate divergence between the Federal Reserve and other central banks
– Slowing economic momentum in the Eurozone
– Resilient US economic data bolstering dollar strength
– Weaker Japanese yen due to ultra-loose monetary policy
– Global risk sentiment and associated safe-haven flows
– Technical positioning and support/resistance levels
In addition to underlying fundamentals, traders are closely analyzing key price levels for major pairs. Let’s delve deeper into the movements of EUR/USD and USD/JPY and explore the technical outlook.
EUR/USD: Modest Rebound, But Downside Risk Remains
The EUR/USD pair experienced a modest rebound after several sessions of downward momentum, as some short-covering and profit-taking emerged around support levels. However, technical indicators and broader fundamentals suggest that the currency pair remains under pressure.
Key Developments and Drivers:
– After dipping below 1.0700, EUR/USD found support near the 1.0670 area and has since recovered slightly above the 1.0700 psychological handle.
– Eurozone PMIs and sentiment indicators have disappointed in recent weeks, pointing to weaker growth conditions, which puts pressure on the euro.
– The US dollar remains broadly supported by hawkish Federal Reserve rhetoric and a strong US labor market.
– Eurozone inflation has shown signs of easing, leading to speculation that the European Central Bank might pivot toward a more dovish stance earlier than anticipated.
Technical Analysis for EUR/USD:
The technical landscape for EUR/USD provides a mixed picture with a short-term rebound but medium-term bearish bias.
– The pair continues to trade within a descending channel, suggesting further downside risk unless a breakout above key resistance occurs.
– Support is firmly found around 1.0670, with secondary support at 1.0600. These levels have provided buyers some relief.
– Resistance lies at 1.0750, with a more significant hurdle near the 55-day Exponential Moving Average around 1.0800.
– Momentum indicators like the MACD and RSI are beginning to stabilize, but not yet confirming a sustainable upside momentum.
– A daily close above 1.0800 could potentially open room for an extended correction toward 1.0880 or even 1.1000, though such a move would largely depend on a shift in market sentiment or a deterioration in US data.
Fundamental Outlook for EUR/USD:
While the euro has room for short-term consolidation, the broader trajectory remains uncertain.
– The ECB is now seen as one of the more likely major central banks to begin cutting rates in 2024, which limits upside potential for euro bulls.
– In contrast, the Federal Reserve maintains a data-dependent but cautious approach, with less dovish guidance.
– US Core PCE inflation and labor reports in the upcoming weeks will be closely watched and could give further directional cues for the pair.
Key Data Releases to Watch for EUR/USD:
– Eurozone CPI flash estimates
– German industrial production figures
– US Nonfarm Payrolls report
– US Core PCE inflation
Conclusion on EUR/USD:
While the EUR/USD has rebounded modestly
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