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US:

  • The Fed left interest rates unchanged as
    expected at the last meeting.
  • The macroeconomic projections were revised higher
    as the economy showed much stronger resilience than expected and the Dot Plot
    showed that the majority of members still expects another rate hike by the end
    of the year with less rate cuts in 2024.
  • Fed Chair Powell
    reaffirmed their data dependency but added that they will proceed carefully.
  • The latest US Core PCE
    came
    in line with expectations with disinflation continuing steady.
  • The labour market remains
    fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
  • The ISM Manufacturing PMI beat
    expectations while the ISM Services PMI came in
    line with forecasts in another sign that the US economy remains resilient.
  • The market doesn’t expect the Fed to hike anymore.

EU:

  • The ECB hiked by 25 bps at the
    last meeting and added a line in the statement that hinted to the end of the
    tightening cycle.
  • President Lagarde didn’t push back against the idea
    of them having reached already the terminal rate and highlighted the slowdown
    in Eurozone economy.
  • The Eurozone CPI recently
    missed across the board supporting the ECB’s stance.
  • The labour market remains
    very tight with the unemployment rate hovering at record low levels.
  • Overall, the economic data lately has been showing
    signs of fast deterioration in the economy.
  • Most ECB members are leaning towards keeping rates
    higher for longer now.
  • The market doesn’t expect the ECB to hike anymore.

EURUSD Technical Analysis –
Daily Timeframe

EURUSD Daily

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On the daily chart, we can see that the EURUSD pair
couldn’t sustain the bearish momentum below the key 1.05 level and started to
correct higher into a key resistance zone. In
fact, around the 1.0620 level we can find the confluence of the
downward trendline, the
38.2% Fibonacci retracement level
and the red 21 moving average. That’s
where the sellers are likely to pile in with a defined risk above the trendline
to position for another selloff into the 1.02 handle.

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EURUSD Technical Analysis –
4 hour Timeframe

EURUSD 4 hour

On the 4 hour chart, we can see that we had a divergence with the
MACD right
below the key 1.05 level. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, the target for the pullback
should be the downward trendline around the 1.06 handle, but if the price
breaks higher, the buyers will have a confirmation of a reversal and will start
to target new higher highs. In case the bearish trend resumes before the price
hit the trendline, the sellers are likely to pile in on a break below the counter-trendline
around the 1.0515 level.

EURUSD Technical Analysis –
1 hour Timeframe

EURUSD 1 hour

On the 1 hour chart, we can see the
short-term price action with a couple of key levels for the buyers. In fact, we
might see them stepping in around the 1.0558 level, where we can find the
previous resistance turned
support
and the red 21 moving average to target a rally into
the 1.0620 resistance. More conservative buyers may want to wait for the price
to take out the recent high around the 1.0584 level before joining the rally.
Alternatively, the buyers can wait for the price to come into the
counter-trendline where they will have a much better risk to reward setup.

Upcoming Events

This week the market is likely to focus on the CPI
report as that’s what might change the expectations around the next FOMC rate
decision. Today, we will see the US PPI data and later in the day the FOMC
Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at
the same time we will also get the latest Jobless Claims figures. On Friday we conclude
the week with the University of Michigan Consumer Sentiment report.

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