The miss in the US CPI report caused a big selloff in the US Dollar across the board as the market’s expectations leant on the less hawkish side. The US data though kept on surprising to the upside with the US Retail Sales Control Group beating expectations by a big margin and the US Initial Claims falling back to record lows. Yesterday, the US PMIs painted a mixed picture with Services PMI finally easing but the Manufacturing PMI surprising with a big jump from 46.2 to 49.0. We are likely to see the Fed doing more if the data keeps on remaining this strong.

The ECB is expected to hike by 25 bps bringing the deposit rate to 3.75% this week. The central bank should stress the data dependency for the September meeting but it’s unlikely to pre-commit to anything at this meeting. The Eurozone PMIs keep on falling pretty fast as the deterioration in the economy becomes clearer going into the second half of the year.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that the break above the upper trendline might have been just a fakeout, and if that’s the case, it opens the door for a massive fall into the lower trendline near the 1.08 handle. Before that, the buyers will have a strong support zone at the 1.1033 level where we can also find the 50% Fibonacci retracement level and the red 21 moving average for confluence. This is where they should pile in with a defined risk below the area and target another high. The sellers, on the other hand, will want to see the price breaking below the support to increase the selling pressure and target the lower trendline.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see the support zone highlighted with a blue box. The short-term trend is clearly downwards as the price is printing lower lows and lower highs while the moving averages are crossed to the downside. A break above the downward minor trendline should give the buyers another confirmation of a change in momentum and likely lead to the start of another uptrend.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see that we have a divergence with the MACD right when we are approaching the key support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the resistance to watch is the one at 1.1110 where we should find the sellers leaning on it to position for the resumption of the downtrend. The buyers will need the price to break above that resistance to confirm the bounce and the possible start of another uptrend.

Upcoming Events

Today the only notable event will be the US Consumer Confidence report, but it’s usually not a market mover unless there is a big surprise. Tomorrow, the Fed is expected to hike by 25 bps and the market will be attentive to any hint about the future intentions. On Thursday, we will have the ECB rate decision where the central bank is expected to hike by 25 bps and stress their data dependency for the next moves. Later that day we will see another US Jobless Claims where strong data should support the US Dollar while weak readings should weaken it. Finally, on Friday, we will have the latest US PCE and ECI reports with the market likely to be more focused on the wages data where a big beat may give the USD some strength.