USD

  • The Fed left interest rates unchanged as expected at the last meeting and dropped the tightening bias in the statement.
  • The US CPI and the US PPI beat expectations for the second consecutive month.
  • The NFP report beat expectations on the headline number, but the unemployment rate and the average hourly earnings missed notably. Moreover, the US Jobless Claims beat expectations across the board with a big positive revision to Continuing Claims.
  • The latest US ISM Manufacturing PMI missed expectations by a big margin remaining in contraction with the US ISM Services PMI following suit but holding on in expansion.
  • The US Retail Sales missed expectations across the board although the data improved from the prior month.
  • The market sees basically a 50/50 chance of a hike in June now.

EUR

  • The ECB left interest rates unchanged as expected at the last meeting revising inflation and growth expectations downwards and maintaining the usual data dependent language.
  • The recent Eurozone CPI beat expectations.
  • The labour market remains historically tight with the unemployment rate hovering at record lows.
  • The latest Eurozone PMIs beat expectations on the Services side with the measure jumping back into expansion while the Manufacturing one missed dragged lower by Germany’s performance.
  • The market expects the ECB to cut rates in June.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that EURUSD eventually broke below the key trendline and extended the fall as the sellers piled in on the breakout. There’s not much else we can glean from this chart, so we need to zoom in to see some more details.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that we have a downward trendline defining the current downtrend with the red 21 moving average for confluence. In case we get a pullback into the trendline, we can expect the sellers to step in with a defined risk above the trendline to position for a drop into the 1.08 handle. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into the 1.10 handle.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see that the latest leg lower is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback with the resistance zone around the 1.09 handle being the last line of defence for the sellers. If the price breaks above the resistance, we can expect the sellers folding and the buyers increasing the bullish momentum into new highs.

Upcoming Events

Tomorrow we have the FOMC rate decision on the agenda where the central bank is expected to keep rates unchanged. On Thursday, we conclude with the US Jobless Claims figures and the latest Eurozone and US PMIs.