EURUSD Analysis: Double Top Target Reached - What's Next?

Article By: ,  Market Analyst

Key Events

  • ECB’s third rate cut opens the door for progressive easing
  • US Core Retail Sales reached a new 2024 high
  • Treasury Secretary Yellen highlighted potential US election impacts

Next Week

  • ECB President Lagarde’s Speech (Wednesday)
  • Flash PMIs from France, Germany, Europe, and the US (Thursday)

DXY Analysis: 3Day Time Frame – Log Scale

Source: Tradingview

The DXY’s rebound from the 100.15 low is currently aligned with the 0.618 Fibonacci retracement level of the downtrend between the high of June 2024 (106.12) and low of September 2024 (100.15). Positive non-farm payroll, CPI, and retail sales data boosted the dollar alongside rising global uncertainties.

Besides haven demand behind geopolitical tensions, the uncertainty regarding the US elections is playing a significant role. In her recent speech, Treasury Secretary Janet Yellen warned that a Trump election, along with his proposed tariff policies, could reignite inflation risks and harm the economy.

As a result, rising uncertainties could maintain a bullish ground on the dollar index leading up to the elections.

EURUSD Analysis: 3Day Time Frame – Log Scale

Source: Tradingview

With the strength of the dollar index on one side and the monetary easing policies of the ECB on the other, the EURUSD completed a double top pattern from the 1.1220 resistance. Further insights on the European economy are expected from Lagarde’s speech on Wednesday, with more volatility likely on Thursday from French, German, European, and US Flash PMIs.

Technically speaking, the EURUSD reached a notable support zone between the 1.08 and 1.0780 levels. A close below 1.0780 can extend the drop towards 1.0730 (the lower boundary of the consolidation) and 1.0680, a crucial level that separates a neutral from a bearish outlook.

From the upside, daily momentum indicators for both the DXY and EURUSD are in extreme zones. The daily RSI on the EURUSD touched down at the oversold 26 zone, hinting at a possible reversal towards the respective resistance levels 1.09 and 1.10.

If momentum builds, the pair could extend further towards resistance levels 1.1220 and 1.1320, potentially setting up a longer-term bullish scenario.

--- Written by Razan Hilal, CMT on X: @Rh_waves

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024