US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly tight.
- Overall, the economic data started to surprise to the downside lately.
- The Fed members are leaning more towards a pause rather than another rate hike.
- The market doesn’t expect the Fed to hike anymore.
EU:
- The ECB hiked by 25 bps and changed a line in the statement that leant more on the dovish side.
- President Lagarde didn’t hint to what we can expect next and, in line with the Fed, just reaffirmed their data dependency and kept all the options on the table.
- Inflation measures did soften a bit but remain uncomfortably high.
- The labour market remains very tight with the unemployment rate stuck at record low levels.
- Overall, the economic data has been showing signs of fast deterioration in the economy pointing to a possible recession in the next 6 months.
- The market doesn’t expect the ECB to hike at the upcoming meeting.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD recently broke out of the downward trendline but sold off soon after leaving behind a fakeout. This is generally a reversal pattern, so the bias remains bearish, and the sellers are still in control. The price is now trading at a key trendline and a break below it would open the door for a bigger fall into the 1.0515 level.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have now a key support around the 1.0770 level. If the price breaks through it, the sellers should pile in aggressively with a defined risk above the support and target the 1.0515 level. The buyers, on the other hand, are likely to step in here with a defined risk below the support and target the 1.1033 level.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a strong resistance around the 1.0840 level where we can also find the downward trendline. If the price breaks above that resistance and the trendline, the bearish setup will be invalidated, and the buyers will regain control. That resistance will also be the last line of defence for the sellers as a break upwards will open the door for a much bigger correction.
Upcoming Events
This week is a bit empty on the data front with just the US ISM Services PMI tomorrow and the US Jobless Claims on Thursday being the main highlights. The market pricing is unlikely to change unless the data comes in really hot in which case, we should see the US Dollar strengthening. On the other hand, weaker readings might just bring forward rate cuts expectations and weigh on the greenback in the short term.
