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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 US PPI data
    yesterday surprised to the upside, but it was mainly energy driven and the
    market brushed it aside.
  • The Fed members continue to cite elevated long-term
    yields as a reason to proceed carefully and pause in November as well.
  • 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
has now reached a key resistance level
where we have the confluence of the trendline and the
38.2% Fibonacci retracement level.
This is where we can expect the sellers to step in with more conviction and a
better risk to reward setup to position for another selloff into new lows. The
buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and reverse the downtrend.

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EURUSD Technical Analysis –
4 hour Timeframe

EURUSD 4 hour

On the 4 hour chart, we can see that the divergence with the
MACD right around
the key 1.05 support signalled the loss of the bearish momentum and the bounce
back to the highs. The trend on this timeframe is clearly bullish as the price
continues to print higher highs and higher lows with the moving averages being
crossed to the upside. More conservative sellers might want to wait for the price
to break below the counter-trendline around the 1.0590 level before joining an
eventual selloff.

EURUSD Technical Analysis –
1 hour Timeframe

EURUSD 1 hour

On the 1 hour chart, we can see that we
have another divergence with the MACD right at the key resistance level. The
price action has also formed what looks like a rising wedge, which
is a reversal pattern and increases the odds of a selloff from the current
levels. Failed patterns are also significant, if not more significant, so if we
see a strong rally from here it could signal that the trend has turned around.
The economic data today will be crucial for the next direction.

Upcoming Events

Today we will get the most important report of the
week, that is the US CPI report. The market is likely to focus on the core
measures and if the figures surprise to the upside the US Dollar is likely to
appreciate as the Fed might raise rates again in November and the 2024 rate
cuts could be repriced again. If the data surprises to the downside though, we
could see the US Dollar weakening as the market could bring rate cuts forward
and the fall in Treasury yields will weigh on the greenback. At the same time,
we will also see the latest US Jobless Claims data which is an important labour
market report. The US Dollar is likely to appreciate both in case the data is
much stronger than expected due to a more hawkish pricing and much weaker than
expected figures as the risk sentiment might deteriorate due to recession
fears. Tomorrow, we conclude the week with the University of Michigan Consumer
Sentiment report.

See the video below

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