EUR/USD Price Analysis: The first upside barrier emerges near 1.0850

July 10, 2024 6:35 am

  • EUR/USD drifts higher to 1.0818 on Wednesday. 
  • The constructive outlook remains intact above the 100-EMA, with a bullish RSI,
  • The first upside barrier is seen at 1.0843, initial support level is located at 1.0800-1.0810 regions. 

The EUR/USD pair trades on a stronger note around 1.0818 on Wednesday during the early European session. The modest uptick of the pair is bolstered by the weaker Greenback The US Consumer Price Index (CPI) inflation data on Thursday will be the highlights for this week. 

Technically, the positive outlook of the major pair remains intact as it holds above the key 100-period Exponential Moving Average (EMA) on the 4-hour chart. The path of least resistance is to the upside, as the Relative Strength Index (RSI) stands in bullish territory near 57.0. 

The immediate resistance level for EUR/USD will emerge at 1.0843, the upper boundary of the Bollinger Band. Any follow-through buying above this level will see a rally to 1.0885, a high of May 15. The next hurdle is seen at 1.0915, a high of June 4. 

On the flip side, the potential support level is located at the 1.0800-1.0810 zone, representing the lower limit of the Bollinger Band and psychological figure. Further south, the next contention level to watch is 1.0790, the 100-period EMA. A breach of this level will pave the way to 1.0710, a low of July 2.  

EUR/USD 4-hour 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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