US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI last week beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen once again last week with the beat in Jobless Claims, although continuing claims surprisingly missed.
- The US PMIs recently showed that the US economy remains pretty resilient.
- The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause in November as well.
- The market doesn’t expect the Fed to hike anymore.
EU:
- The ECB hiked by 25 bps at the last meeting and added a line in the statement that signalled the end of the tightening cycle.
- President Lagarde didn’t push back against the idea of them having reached already the terminal rate and highlighted the slowdown in Eurozone economy.
- The Eurozone CPI recently missed across the board supporting the ECB’s stance.
- The labour market remains very tight with the unemployment rate hovering at record low levels.
- Overall, the economic data lately has been showing signs of fast deterioration in the economy.
- Most ECB members are leaning towards keeping rates higher for longer now.
- The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the EURUSD pair got rejected perfectly from the key resistance around the 1.0620 level where we had the confluence with the trendline and the 38.2% Fibonacci retracement level. The sellers stepped in with a defined risk above the trendline to position for a break below the 1.05 support and target the 1.02 handle next. Yesterday, we got a bounce from the support level, and we will likely see some late sellers trying to join the trend on this pullback.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the last leg lower into the 1.05 support diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got the pullback into the trendline where the downtrend has likely resumed. The price is now getting rejected from the red 21 moving average as the sellers are starting to pile in with a defined risk above the last swing high to position for a drop into new lows. The buyers, on the other hand, will need the price to break above the trendline to switch the bias from bearish to bullish and start targeting new higher highs.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we got another divergence recently which led to a pullback into the swing high around the 1.0550 level. The sellers leant on the resistance with a tight risk above the level and a great risk to reward setup. The break below the counter-trendline should be a confirmation that the bearish momentum is strong and more sellers are likely to pile in to target new lows.
The buyers, on the other hand, will want to see the price reversing and break above the resistance zone to invalidate the bearish setup and target the break above the trendline. Alternatively, we can expect the buyers to step in around the 1.05 support to try another rally from the lows with a great risk to reward setup.
Upcoming Events
Today we will get the US Retail Sales data and it will be interesting to see if consumer spending has weakened or it’s still holding on. On Thursday, we will get the US Jobless Claims report and we will also hear from Fed Chair Powell with the market focused on any hint about the near term policy outlook.
See the video below
