EUR/USD Analysis Summary Today
- Overall Trend: Bullish.
- Daily Support Levels: 1.1700 - 1.1650 - 1.1590.
- Daily Resistance Levels: 1.1780 - 1.1860 - 1.1910.
EUR/USD Trading Signals:
- Buy: Buy EUR/USD from the 1.1640 support level with a target of 1.1820 and a stop-loss at 1.1580.
- Sell: Sell EUR/USD from the 1.1810 resistance level with a target of 1.1600 and a stop-loss at 1.1880.
Technical Analysis of EUR/USD Today:
The EUR/USD pair remains stable above the 1.1700 resistance level, trading near its highest point since late July. It hit a high of 1.1780 today before settling around 1.1750. This strength is being driven by overall U.S. dollar weakness and cautious positioning ahead of a busy week. In France, Prime Minister François Bayrou is facing a no-confidence vote on Monday that he is widely expected to lose. This could force President Emmanuel Macron to appoint his fifth prime minister in less than two years.
Later in the week, the European Central Bank meets on Thursday, with policymakers expected to keep interest rates unchanged for the second consecutive meeting. The ECB is considering the impact of continued trade uncertainty and the potential repercussions of proposed US tariffs, while inflation has remained at target for the third consecutive month.
Across the Atlantic, investors are focusing on this week's US inflation report after weak labor market data last week reinforced the case for a Federal Reserve interest rate cut in September, with markets now pricing in the possibility of a larger-than-usual move.
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EUR/USD Forecast: A Temporary Pullback Possible
According to currency trading experts, the euro should regain some of its recent strength before a potential rally. The EUR/USD pair appears to be in an uptrend at the start of the week, and analysts expect this rise to continue. However, the strong gains on Friday and the positive start on Monday suggest the pair may be overextended. A near-term pullback for consolidation would not be surprising.
Technically, the strong performance on Friday and Monday leaves the EUR/USD pair deviating from its nine-day exponential moving average, which could lead to a slight rebound in a market that won't see any major news until mid-week and the release of US Producer Price Index (PPI) inflation figures. The gains have also pushed the exchange rate to the top of a recent range, specifically at 1.1735, which is the 78.6% Fibonacci retracement level of the July decline. As the chart shows, this 78.6% retracement level has capped gains in August and September, indicating it's a strong resistance level. This resistance, combined with the deviation from the nine-day EMA, points to a period of consolidation.
Trading Advice and Outlook
Traders are advised to be cautious when trading EUR/USD until there is a reaction to the U.S. inflation data and the ECB's announcement. It is possible that a selling strategy could ultimately be the best option.
The key question is whether this neutrality will turn into a deeper decline that reinforces range trading, or whether a higher breakout will occur, allowing a target of the July 24 high of 1.1788. Overall, although technical analysis is ultimately constructive, whether or not the range breaks will likely depend on the outcome of an eventful week in the forex market, with the release of the European Central Bank's decision and US inflation figures.
But before that, we have a minor issue regarding the French government, which is likely to be removed in a confidence vote. Prior to this crucial moment, euro trading has been relatively relaxed, and we believe that the dismissal of the Barnier government in December sets a sufficient precedent to maintain market confidence that France has not yet reached a point of destabilization in the eurozone.
The European Central Bank is likely to keep interest rates unchanged at its meeting on Thursday, ending its easing cycle. This is expected to contribute to the stabilization of short-term European interest rates (bond yields), which will naturally support the euro, especially against the currencies of central banks that may be inclined to cut interest rates further.
At the same time, the US dollar is certainly a strong candidate, as the Federal Reserve is likely to cut interest rates by 25 basis points next month, with additional 50 basis point cuts planned for the rest of the year.
The problem is that these interest rate developments are anticipated by the foreign exchange market and are therefore linked to the euro-dollar exchange rate.
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