USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
  • The US CPI beat expectations for the third consecutive month, while the US PPI came in line with forecasts.
  • The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
  • The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
  • The US Retail Sales beat expectations across the board by a big margin with positive revisions to the prior figures.
  • The market now expects the first rate cut in September.

EUR

  • The ECB left interest rates unchanged as expected and opened the door for a rate cut in June.
  • The recent Eurozone CPI missed 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 while the Manufacturing one missed dropping further in contraction.
  • 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 broke the key 1.07 support and extended the drop into the 1.06 handle as the divergence between the Fed and the ECB became stronger. The pair this week pulled back to retest the broken support now turned resistance and fell back to the lows as we got a hawkish Fed’s Williams comment and the Israeli strike against Iran tonight. The sellers will want to see the price breaking the lows to increase the bearish bets into the 1.05 support zone, while the buyers will look for a break above the 1.07 resistance to start targeting the 1.10 handle.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that the price diverged with the MACD around the 1.06 handle, which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the 1.07 resistance zone before another drop as the sellers stepped in with a defined risk above the Fibonacci level to target new lows. The buyers might want to pile in around the lows to position for a rally back into the resistance targeting a break above it.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see more closely the recent price action with the pair getting near the lows. Iran downplayed the Israeli strike tonight, so we might put this geopolitical event behind our backs. The market could react with some positive risk sentiment today, so the buyers might try to position for a rally back into the resistance. A break below the low though would invalidate the bullish setup and likely trigger more selling.