EUR/USD Price Analysis: Holds position around 1.0850 due to bullish bias

July 8, 2024 6:43 am

  • EUR/USD may test the upper boundary as the daily chart analysis shows a bullish bias.
  • The 14-day RSI indicates a confirmation of a bullish trend for the pair.
  • The nine-day EMA at the 1.0782 level could act as a key support.

EUR/USD halts its seven-day winning streak, trading around 1.0830 during the Asian hours on Monday. The renewed demand for the US Dollar (USD) puts pressure on the EUR/USD pair. However, the decline in the US Treasury yields could limit the upside of the Greenback and put pressure on the pair.

The technical analysis of the daily chart shows a bullish inclination, with the pair moving within an ascending channel. Furthermore, the 14-day Relative Strength Index (RSI), a momentum indicator, is above the 50 level, confirming the bullish trend for EUR/USD. Continued upward movement could reinforce the pair’s bullish bias.

The EUR/USD pair faces potential resistance near the upper boundary of the ascending channel around 1.0890, with further resistance at the psychological level of 1.0900. A breakout above 1.0900 could strengthen the pair’s momentum toward revisiting the three-month high at 1.0915.

On the downside, initial support for EUR/USD lies near the nine-day Exponential Moving Average (EMA) at 1.0782, followed by support near the lower boundary of the ascending channel around 1.0750.

A breach below the latter might increase downward pressure, targeting support around the key level of 1.0670, potentially serving as a rebound support level.

EUR/USD: Daily Chart

Euro FAQs

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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