EUR/USD Daily Chart Analysis – 2024-04-04

EUR/USD saw a robust rally from its overnight low of 1.0760, pushing past several key technical levels. The momentum was partly fueled by a decline in U.S. yields and a narrowing of spreads following softer-than-expected ISM non-manufacturing data, which diminished the dollar’s appeal. Remarks from Fed officials, including Fed’s Bostic and Chair Powell, further catalyzed the dollar’s decline, allowing EUR/USD to surge above significant moving averages, approaching the critical junctures of the 50- and 200-Day Moving Averages (DMAs).

Technically, bullish signals have emerged with a rising daily Relative Strength Index (RSI), a potential monthly bull hammer on the candlestick chart, and a piercing of the Ichimoku cloud, suggesting a possible change in trend. The pair is now confronting resistance near the 1.0830 region, a level reinforced by the proximity of the 50- and 200-DMAs, which could act as pivotal points for the next directional move.

Fundamental Analysis: The fundamental landscape for the EUR/USD has been influenced by the recent soft U.S. service sector data, hinting at a potential economic slowdown, which could lead to a less aggressive stance by the Federal Reserve. This has translated into a weaker dollar, benefiting the euro. Moving forward, U.S. weekly jobless claims and speeches from various Fed members will be closely scrutinized for further insights into the central bank’s policy trajectory.

Overall Market Sentiment: The market sentiment has shifted towards a cautiously optimistic outlook for the EUR/USD pair, considering the recent technical breakouts and fundamental context.

Sentiment Percentage Breakdown:

• 60% Positive: Enhanced by technical breakouts and reinforced by Fed officials’ dovish tones, suggesting a possible continuation of the rally.
• 20% Neutral: Awaiting further data and Fed commentary to confirm or negate the recent bullish momentum.
• 20% Negative: Considering risks associated with upcoming U.S. data releases and potential future hawkish shifts in Fed rhetoric.

The positive sentiment is predominantly driven by recent bullish technical signals and supportive comments from Fed officials that suggest a dovish policy pivot. The neutral sentiment acknowledges the ongoing uncertainty and the potential for market dynamics to change with new data. The negative sentiment remains cautious about the possibility of reversing fortunes should upcoming economic indicators or Fed speeches provide a more hawkish outlook than currently anticipated.