US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US economic data keeps on surprising to the upside, but inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
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.
- The data for the Eurozone has been consistently missing expectations, but the recent inflation and employment reports remained strong justifying another rate hike in September.
- The market is expecting a 25 bps rate hike in September.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD has been falling pretty strongly since the fakeout above the top trendline around the 1.12 handle. The trend remains clearly bearish as the price has been printing lower lows and lower highs and the moving averages are crossed to the downside. At the moment, we are seeing a pullback as the price has bounced from the support area around the 1.0840 level. We can see that we are approaching a downward trendline where we have also the confluence with the red 21 moving average. This is where the sellers are likely to pile in with a defined risk above the trendline to target the 1.08 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has been diverging with the MACD right when it was approaching the support area at 1.0840. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are seeing a pullback into the trendline where we can also find the Fibonacci retracement levels for further confluence. A break above the trendline would give the buyers more conviction for a bullish trend and the first target would be the 1.1033 level.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we recently broke out of the falling wedge, which is generally a reversal pattern and the target should be the top of the pattern around the 1.0950 level. Therefore, everything points to that trendline resistance, so it will be a “make it or break it” moment for the sellers.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs tomorrow and the US Jobless Claims on Thursday. Given the strong appreciation in the US Dollar seen in the past weeks, we can expect some USD weakness if the data misses expectations, and we will likely need much stronger than expected readings to see another sustained rally in the greenback. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.
See also the video below:
