FX.co ★ Technical Analysis of EUR/USD for February 2, 2024

EUR/USD Climbs Higher As US Dollar Gets Weaker Across The Board

Key Takeaways:

1. Emerging Bullish Potential: The EUR/USD pair shows signs of a bullish rebound from a low of 1.0781, with resistance near 1.0888. A break above this level could validate bullish strength, targeting higher resistance levels.
2. Bearish Patterns Indicate Caution: Despite the bullish rebound, the presence of 'Shooting Star' and 'Bearish Engulfing' patterns suggests potential bearish reversals. Monitoring these patterns is crucial for understanding possible downward movements.
3. Sentiment and Technical Indicators Favor Bulls: Current market sentiment leans towards bullishness, and the majority of technical indicators suggest a Buy signal. However, traders should remain vigilant for shifts in market mood and indicator signals.

Morning Brief: A Weak Dollar and Its Impact

The US dollar has shown notable weakness at this week's close, contrasting with its lowest EUR/USD position since early December. This decline is linked to a drop in 10-year bond yields to 3.87%. Federal Reserve Chairman Powell recently clarified that a rate cut in March is unlikely, despite approaching the reduction phase. The Fed remains prepared to maintain high interest rates. However, Powell also noted that a deteriorating labor market could accelerate rate cuts. With the first NFP report due soon, its performance, influenced by various factors like ADP's report, unemployment benefits applications, and the JOLTS report, is highly anticipated. The December unemployment rate fell to 3.7%, lower than the Fed's earlier projection of around 4%. A single report is not conclusive, but consecutive poor reports could indicate a trend, especially considering layoffs in the technology sector.

Technical Market Outlook: Understanding EUR/USD Movements

The EUR/USD pair has rebounded from a low of 1.0781, now approaching a resistance at 1.0888. A breakout above this could affirm bullish strength, aiming for 1.0902 and 1.0933. The current support is at 1.0858, with positive H4 momentum supporting a short-term bullish outlook.

Technical Insights: Key Indicators and Patterns

• Candlestick Patterns: A 'Hammer' pattern suggests a bullish reversal, while a 'Shooting Star' and a 'Bearish Engulfing' pattern signal potential bearish turns.
• Moving Averages: The price below 100-period EMA and 50-period DEMA suggests a bearish trend.
• Support/Resistance: Key support around 1.0785; a break below could indicate more bearish momentum.
• RSI: At 62, nearing overbought territory, which might signal an impending reversal.

EUR/USD H1 Intraday Indicator Analysis:

• Majority of technical indicators (19 out of 22) show a Buy signal; 3 indicate Sell.
• All 18 moving averages signal Buy.

Sentiment Scoreboard: Market Mood

The sentiment is predominantly bullish (55% vs. 45% bears), maintaining last week's bullish trend (50% bulls vs. 50% bears), with the last three days showing neutral sentiment (50% bulls vs. 50% bears).

Weekly Pivot Points:

• WR3 - 1.08727
• WR2 - 1.08558
• WR1 - 1.08450
• Weekly Pivot - 1.08389
• WS1 - 1.08281
• WS2 - 1.08220
• WS3 - 1.08051

Bullish Scenario:

A confirmation of the Hammer pattern could lead to a bounce upwards, with targets near 1.0900. This would be further validated by a rise in buying volume and RSI above 50.

Bearish Scenario:

A continued influence of the bearish engulfing and shooting star patterns may push the price lower. A break below 1.0785 would confirm a bearish trend, potentially targeting the 1.0700 area. A declining RSI would support this scenario.

Conclusion:

For bullish traders, watch for a sustained break above key resistance levels and positive momentum indicators. Bearish traders should look for breaks below support levels and declining momentum indicators.

Useful Links

• More Artcles
• InstaForex Course for Beginners
• Open Trading Account

Important Notice

The begginers in forex trading need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp market fluctuations due to increased volatility. If you decide to trade during the news release, then always place stop orders to minimize losses.

Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. For successful trading, you need to have a clear trading plan and stay focues and disciplined. Spontaneous trading decision based on the current market situation is an inherently losing strategy for a scalper or daytrader.

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