Geopolitical tensions in the Middle East have bolstered the dollar’s safe-haven appeal, pressuring the euro.
Key Points
- EUR/USD saw slight gains, capped by dollar strength.
- The dollar eased on speculation over Fed rate cuts.
- U.S. CPI and Fed minutes will impact the EUR/USD direction.
EUR/USD Daily Price Analysis – 08/10/2024
The EUR/USD pair traded marginally higher on Tuesday, continuing a mild recovery after Monday’s close at 1.09748. Currently, at 1.09894, the euro is seeing modest gains of 0.14% from its opening level today of 1.09759, while the greenback’s strength continues to play a pivotal role in limiting any significant upside for the euro.
Dollar Strength Amid Interest Rate Speculations
The U.S. dollar softened slightly on Tuesday as investors evaluated the outlook for further Federal Reserve rate cuts this year. The USD index slipped by 0.2% to 102.31 after reaching seven-week highs recently. This easing reflects a shift in market sentiment as traders increasingly believe the Federal Reserve will take a cautious approach toward rate cuts, driven by unexpectedly strong labor market data last week.
Federal Reserve Chair Jerome Powell and other key Fed officials have reiterated that there is no immediate intention to aggressively cut rates despite beginning the easing cycle with a larger cut in September. Markets are now placing a roughly 90% probability of a 25-basis-point cut in November, with speculation of only 50 basis points of easing by December, down from earlier expectations of 70 basis points. This narrative has kept the dollar on the front foot, driving a multi-week rally against most major currencies, including the euro.
Geopolitical Tensions Supporting Safe-Haven Demand for the USD
Geopolitical tensions in the Middle East have continued to support the safe-haven appeal of the U.S. dollar. This has put pressure on the euro, which recently hit a seven-week low of 1.09515, indicating that the market is still wary of taking large positions in riskier assets. The euro traded 0.2% higher today at around 1.099225, just shy of this recent low, but struggled to maintain momentum given the strengthening U.S. currency.
ECB’s Position and Potential Impact on EUR/USD
The euro, on the other hand, faces its own headwinds. Money markets are pricing in an almost certain rate cut by the ECB in October. Persistently high service inflation and increasing oil prices might prompt the ECB to revise its inflation outlook, potentially complicating expectations for monetary easing.
For the near term, the wide rate differential between the eurozone and the U.S. remains a downside factor for EUR/USD. If the ECB does indeed pivot towards a dovish stance and the Federal Reserve maintains a tighter monetary policy, EUR/USD could continue to face selling pressure, especially if U.S. yields remain elevated. The benchmark 10-year U.S. Treasury yield remains above 4%, having reached that level for the first time in two months on Monday, indicating that traders are lowering expectations for aggressive rate cuts.
Key Economic Data and News to Be Released Today
Investor focus is shifting to critical economic data releases later this week, notably the U.S. CPI report due on Thursday and the minutes from the Federal Reserve’s September meeting set for Wednesday. Any upside surprise in the CPI could lead to another rally in the U.S. dollar and might prompt more hawkish rhetoric from the Fed.
If the CPI data comes in soft enough, it could calm down the Fed’s doves, potentially halting the dollar’s bullish trajectory and providing some breathing room for the euro. Conversely, higher-than-expected inflation could dampen expectations of a November rate cut, thereby bolstering the greenback further and pushing EUR/USD lower.
EUR/USD Technical Analysis – 08/10/2024
From a technical analysis perspective, the EUR/USD pair is currently reacting to a key level and an intraday 200 EMA. The direction is not so clear, but we have a critical buy or sell scenario playing out before our eyes.
Looking at the chart above, we can see price testing the key support level. Should the price react to this level with a clear bullish candlestick pattern, it can be a perfect long opportunity. On the other hand, if the price breaks below and retests the bullish trendline, the price may experience a further decline.
EUR/USD Fibonacci Key Price Levels 08/10/2024
Short-term traders planning to invest in EUR/USD today should keep a close eye on the following key price levels for the day:
| Support | Resistance |
| 1.09595 | 1.09845 |
| 1.09517 | 1.09923 |
| 1.09392 | 1.10048 |
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