Last week we heard from many central bank speakers. The overall consensus remains the same: wait for more data to determine the extent of further tightening. Although the majority of the FOMC anticipates two additional rate hikes this year, they consistently emphasize that these decisions are contingent upon the data. Last week's data inclines them more toward a hike, given the surprisingly hot housing market data, the stable US Jobless Claims, and the US Services PMI beating expectations.
Naturally, the forthcoming NFP and CPI reports will play a pivotal role. However, if we continue to get good data, the market's current expectation of a rate increase by the Fed in July seems likely. On the other hand, the ECB speakers made clear that a July hike is almost guaranteed unless there’s a material change in the data, but the September hike is much more data-dependent and given the recent surprisingly weak European PMI data, the ECB may stop already in July.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD erased all the May weakness and rallied back into the 1.10 handle in June. The price got rejected pretty strongly there and the weak European PMIs extended the fall towards the 1.0844 level. The trend for now remains bullish as the moving averages are still crossed to the upside and the price is making higher highs and higher lows, but the momentum is weakening and if the data for the Eurozone keeps disappointing, we may see a top here.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the last push into the 1.10 handle was diverging with the MACD, which was a sign of a weakening momentum and it’s often followed by pullbacks or reversals. The price since then broke the previous swing low and the trendline, which may be an early sign of a change in trend, and pulled back into the red 21 moving average and 50% Fibonacci retracement level. This is where we should expect the sellers piling in to target another fall into the 1.0779 support.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that at the moment the price is trading within a rising channel with the buyers leaning on the red 21 moving average for further upside. We can expect more buying pressure to come if the price breaks above the 61.8% level and the trendline as such a move would invalidate the bearish setup. On the other hand, more conservative sellers can wait for the price to break below the lower bound of the channel to pile in and extend the selloff into the 1.0779 support.
This week is a bit empty on the data front with just the EZ CPI and US Jobless Claims on Thursday and the US PCE scheduled for Friday. Nonetheless, we will hear again from many central bank members.
