Fundamental Overview

The USD yesterday was sold across the board following the soft US CPI report. The data made the market to price back in two cuts for this year. Later in the day though we got a bit more hawkish than expected FOMC decision where the dot plot showed that the Fed sees just one cut for this year despite the soft US CPI report.

This gave the greenback a boost, but Fed Chair Powell backpedalled on the projections making them a bit less worrying as the central bank remains very data dependent. So, all in all, the US Dollar might still come under pressure as the risk sentiment should improve thanks to the soft US CPI.

The EUR, on the other hand, has been gaining ground in the past months against the USD mainly because of the Dollar weakness amid the general risk-on sentiment regime due to the pickup in global growth.

This sentiment has been changed recently by the NFP data and the European elections over the weekend where we got some governments like France calling snap elections which added even more pressure on the single currency due to political uncertainty.

Nevertheless, if we see the market going back into risk-on due to the soft US CPI, the EURUSD pair should still maintain its upward trajectory amid general US Dollar weakness.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis

On the daily chart, we can see that EURUSD erased almost all the losses from the strong US NFP report and the European elections. The price spiked above the 1.08 handle following the US CPI release and then pulled back as we got a bit more hawkish than expected FOMC decision.

There’s no real strong fundamental driver supporting the Euro as the market continues to trade based on the risk sentiment. If we were to go back into risk-on in the next days, we can expect the pair climbing back into the 1.09 resistance and possibly even reach 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 rallied above the 1.08 handle and then pulled back into it. We have also the confluence of the 38.2% Fibonacci retracement level sitting there which makes it a good support zone.

This is where we can expect the buyers to step in with a defined risk below it to position for a rally into the 1.09 resistance. The sellers, on the other hand, will want to see the price breaking lower to gain a bit more conviction and position for a drop back into the 1.0727 support.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see more clearly the consolidation around the 1.08 support zone. If the price were to rise above the 1.0820 level, then we can expect the buyers to gain a bit more confidence on a continuation of the rally. Conversely, a break below the 1.08 support should turn the bias more bearish giving the sellers more control. The red lines define the average daily range.

Upcoming Catalysts

Today we have the US PPI and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the University of Michigan Consumer Sentiment survey.