Fundamental Overview
The USD has been generally under pressure since the benign US CPI report last week as the hawkish expectations subsided and the market switched its focus from inflation back to growth. This triggered a positive risk sentiment which is generally negative for the greenback. Yesterday, we got some US Dollar strength which peaked with the FOMC minutes as the market faded the “old news”.
The EUR, on the other hand, got a boost today from the Eurozone PMIs where the data showed more positive momentum in growth with positive signs on the inflation front. Moreover, the Eurozone wage growth data was higher than the previous quarter, so that might keep the ECB more wary about easing too much the policy rate after the June cut.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD pulled back from the 1.09 handle and bounced on the previous swing high level at 1.0812. The price extended the gains today following the Eurozone PMIs.
A break above the 1.09 handle should see the bullish momentum increasing as the buyers will likely pile in more aggressively and target the 1.10 handle. The sellers, on the other hand, will want to see the price breaking below the 1.0812 level to regain control and take the pair into the 1.0727 support.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price yesterday fell below the trendline and the 38.2% Fibonacci retracement level as the hawkish FOMC minutes triggered the positive USD reaction. Such reactions are generally caused by algos, and the market fades them if there’s nothing new that changes the picture.
This is also a lesson to not rely too much on the technicals because such events can lead to breakouts which are not supported by the fundamentals.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a good resistance around the 1.0860 level where we can find the downward trendline and the upper limit of the average daily range. The sellers will likely lean on this level to position for a drop back into the 1.0812 level while the buyers will want to see a break to the upside to increase the bullish bets into the 1.09 handle and beyond.
Upcoming Catalysts
The only notable event left is the US Flash PMIs at 13:45 GMT (09:45 ET).
