USD

  • The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long.
  • The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
  • The US PPI missed expectations across the board supporting the disinflationary impulse.
  • The labour market continues to soften although Initial Claims keep on hovering around cycle lows while Continuing Claims are ranging at a higher level.
  • The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
  • The US Retail Sales beat expectations across the board.
  • The Fed members recently have been pushing back on the aggressive rate cuts expectations.
  • The market expectation for a rate cut in March fell to roughly 50%.

EUR

  • The ECB left interest rates unchanged as expected at the last meeting maintaining the usual data dependent language.
  • President Lagarde highlighted once again that the risks to the economy are skewed to the downside and that they did not discuss rate cuts, which was a pushback against the aggressive market’s rate cut pricing.
  • The recent Eurozone CPI missed expectations with the disinflationary process remaining intact.
  • The labour market remains historically tight with the unemployment rate hovering at cycle lows.
  • The Eurozone PMIs missed expectations across the board with both the Manufacturing and Services sectors falling further into contraction.
  • The ECB members recently have been pushing back against the aggressive rate cuts expectations.
  • The market expects the ECB to cut rates in April.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that EURUSD broke through the key trendline and opened the door for a fall into the 1.07 handle. We can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, given the break below the trendline the target for the reversal should be right around the 1.07 level.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that the pair has been ranging between the 1.09 support and the 1.10 resistance, but this week it broke out which should strengthen the case for a move lower. The price pulled back in the APAC session right into the previous support now turned resistance where we can also find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. This is where the sellers should step in again with a defined risk above the resistance to position for a drop into the 1.07 handle.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see more closely the price action at the resistance zone and we can see that we had also a trendline for extra confluence with the price failing to sustain a breakout. This might turn out to be a fakeout, which is generally a reversal signal, but the price will need to break below the red 21 moving average to confirm it. The buyers, on the other hand, will want to see the price breaking above the resistance to invalidate the bearish setup and position for a rally back into the 1.10 level.

Upcoming Events

Today, we will see the latest US Jobless Claims figures, while tomorrow we conclude the week with the University of Michigan Consumer Sentiment survey.