EUR/USD Technical Analysis
The EUR/USD pair has recently gained bullish momentum, causing an exciting buzz among forex traders. The pair recovered from its lowest point at 1.0724 and is extending its gains beyond a bearish curve if it can continue its pattern to exceed last week’s high, which was 1.0865.
In the early hours of Thursday, the euro rallied significantly against the dollar, but it is limited within a broader trading range. The current exchange rate of the EUR/USD pair at 1.0850 indicates a state of equilibrium, which can also be called fair value. The primary levels to watch are 1.07 for support and 1.10 as a significant resistance barrier.
The announcement of the Nonfarm Payroll will impact the performance of the EUR-USD pair. This will make traders hesitant to take strong positions in either direction. So, the market might be gaining bullish momentum, but it is still in a state of balance. Some catalysts could push the trading pair towards further increases.
Traders looking to invest in EUR/USD pairs should be cautious. It might be tempting to dive in after seeing reports of the currency pair rising, but it’s recommended to take a step back. After any significant movements, the market might revert to the established range.
The pair is overbought but continues to pressure intraday highs. According to Simple Moving Average charting, it gains upward traction below the current level. The price has also recovered above longer ones. Most technical indicators for analyzing this EUR/USD pair are heading north within extreme levels, with no signs of exhaustion.
Improving Eurozone Economy
The EUR/USD rate can increase for two reasons: either the euro is getting stronger, or the dollar is weaker. Nowadays, the Eurozone economy has been showing positive signs that are encouraging forex traders.
For one, the Hamburg Commercial Bank and S&P Global have revealed a survey showing strategic hiring, sustained job creation, and an optimistic business outlook. This might indicate an increase in economic activity.
The Eurozone index also showed signs of expansion, reaching a peak of 50.3 in March 2024 after ten months. Demand stabilization and increased employment in the EU led to better business confidence, which had not been seen since February 2022, paving the way for future economic activity.
The European Central Bank released reports that showed that inflation in the Eurozone will move downwards in the coming months. So, it is considering cutting interest rates for better economic activity. All of these have led to the strengthening of the EUR against the USD.
March ECB Meeting
All forex traders watched the minutes from the March ECB meeting. There, President Christine Lagarde did not conclude whether there would be an interest rate cut in April but suggested that it could happen in June instead.
Also, the inflation data at the meeting showed that inflation calmed faster than the 2.4% previously predicted. However, the inflation in the service sector has not changed.
Unsure US Interest Rate Cuts
The rising rate of the EUR/USD is based on the weakness of the US dollar. Federal Reserve chair Jerome Powell’s comments dampened investors’ enthusiasm. He did not give a straight answer on the US interest cuts, which decreased the yields on the US dollar.
Powell said that the Fed would cut interest rates this year, but he said nothing about the timing and scale of these cuts. He added that the central bank would require more evidence before determining that inflation is close to the 2% target.
The Fed’s outlook on the economy has not changed despite worsened inflation, which might reassure forex traders that monetary policy will be lax. This came after ADP data indicated better-than-anticipated job growth. However, the Purchasing Managers’ Index for the services sector in the US has decreased, contrary to the predicted increase.
Discouraging Data From the United States
On the other hand, the United States has not had much favorable data, weakening the dollar and causing the EUR/USD rate to rise. The February Goods and Service Trade Balance revealed a deficit of $68.9 billion, higher than the $67.4 billion in January. Unemployment claims are also higher than market players anticipated.
Investors and forex traders are awaiting the upcoming Nonfarm Payrolls report, which should show new positions in March and a steady unemployment rate. However, it is unclear whether they will get what they expect.
Future Projections for EUR/USD
Based on the forecasts and analysis, the EUR/USD pair will rise in the foreseeable future. Analysts expect potential gains of the euro against the US dollar in the coming months. These predictions are based on the improved performance of the Eurozone economy and dynamics between the two countries. It’s still recommended that traders and investors should monitor economic indicators regarding the EUR/USD exchange rate.