US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations with the Core measure continuing to show disinflation.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with the strong beat in Jobless Claims.
- The US Consumer Confidence this week missed expectations although the jobs details were positive.
- The market doesn’t expect the Fed to hike again at the moment.
EU:
- The ECB hiked by 25 bps at the last meeting and added a line in the statement that hinted to 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.
- Inflation measures did soften a bit lately but remain uncomfortably high.
- 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 pointing to a possible recession in the near future.
- The majority of ECB members is 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 has finally reached the 1.05 handle, which was the first main target of this incredible selloff. The pair is now a bit overstretched to the downside and we might see a bounce on this key level. From a risk management perspective, the sellers would be better off to lean on the major trendline where there’s also the red 21 moving average, but we might need weak US data or strong Eurozone readings to rally all the way up to that area.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the 38.2% Fibonacci retracement level and the 1.07 handle around the major trendline, so that’s going to be a strong resistance if the price gets there. Right now, the sellers are in control, and we might see them coming back strongly already at the minor trendline where they will also have the confluence with the moving averages. The buyers, on the other hand, will want to see the price breaking above the minor trendline to position for a rally into the major trendline.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup around the minor trendline with the Fibonacci retracement levels for confluence. That’s where we can expect the sellers to pile in with a defined risk above the trendline to position for a break below the 1.05 handle and much lower prices next. The buyers, on the other hand, are likely to start piling in already here around the 1.05 handle to target a correction into the major trendline.
Upcoming Events
Today the main event will be the US Jobless Claims report. Strong data is likely to keep the USD supported while weak readings might weigh on the greenback in the short term. Tomorrow, we will see the latest Eurozone CPI, which shouldn’t change much for the ECB unless we see some big surprises, and finally the US PCE data.